compound interest

noun

interest paid on both the principal and on accrued interest.

Origin of compound interest

First recorded in 1650–60

Words nearby compound interest

compound fraction, compound fracture, compound gland, compound heterozygote, compound hyperopic astigmatism, compound interest, compound interval, compound joint, compound leaf, compound lens, compound magnet

British Dictionary definitions for compound interest

compound interest

noun

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

Scientific definitions for compound interest

compound interest

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 X 0.05 = $1102.50, after three years it will be $1102.50 X 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 nth year will be P(1 + I)n. The growth of the compound amount is exponential and not linear. Compare simple interest.

Cultural definitions for compound interest

compound interest

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.