Compound Interest

general

Compound interest is interest calculated on both the initial principal and the accumulated interest from previous periods. Unlike simple interest, which is calculated only on the principal, compound interest grows exponentially over time. The frequency of compounding (daily, monthly, annually) affects the total return. Albert Einstein reportedly called compound interest the eighth wonder of the world.

Related Terms

Compound Annual Growth Rate (CAGR) Dollar-Cost Averaging (DCA) Total Return

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