compound interest

noun

1. interest paid on both the principal and on accrued interest.

compound interest

noun

1. interest calculated on both the principal and its accrued interest Compare simple interest

compound interest

1. Interest computed on the original principal plus any accrued interest. Thus if 5% is the rate of interest per year and the principal is $1000, the compound amount after one year will be $1050, after two years it will be $1050 × 0.05 = $1102.50, after three years it will be $1102.50 × 0.05 = $1157.63, and so forth. Mathematically, if P is the original principal and I the rate of interest expressed as a decimal, the compound amount at the end of the n th year will be P (1 + I ) ⁿ. The growth of the compound amount is exponential and not linear.
2. Compare simple interest

compound interest

1. Interest that is added not only to the principal of a loan or savings account but also to the interest already added to the loan or account; interest paid on interest.

Word History and Origins

Origin of compound interest¹

First recorded in 1650–60

Example Sentences

With time and population growth, you didn't need to be able to do compound interest; you just had to be able to count.

From The Daily Beast

The magic of compound interest means that it's always hard to make up for lost time.

From The Daily Beast

In a classroom environment, were taught about compound interest, mortgages, and debt.

From The Daily Beast

And the account was at last settled, with compound interest,—as in fact such accounts are sure to be, one way or other.

From Project Gutenberg

Not from the Jews, for their compound interest of fifty per cent every six months would have ruined him in less than two years.

From Project Gutenberg

You out with your five at interest, compound interest; soon comes another five; treat it the same: in ten years—eh?

From Project Gutenberg

I happened to have some weightier things to think of than usury and compound interest, as I, indeed, have at this moment.

From Project Gutenberg

Money makes money; it accumulates like a snow-ball; interest and compound interest heaped on each other soon form a round sum.

From Project Gutenberg