Interest computed by applying the simple rate of interest to calculate interest on principal plus interest on successive increments of interest earned in prior periods. American Banker Glossary
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interest paid on previously earned interest as well as on the principal. Bloomberg Financial Dictionary
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Interest is earned on the principal amount and the accumulated interest of prior periods.
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The interest amount earned on the original principal and on the accumulated interest. Compounding annually means that there is only one period each year in which interest is calculated. For example, if £100 is deposited with annually calculated interest at 10 percent, after one year there will be £110. Where simple interest always calculates the rate from the initial amount invested (giving £120
after two years, £130 after three etc.), compound interest calculates the 10 percent from the previous year's total (giving £121 after two years and £133.10 after three). The extra £3.10 is the compound interest.
► See also Simple Interest.
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compound interest UK US noun [U]
► FINANCE interest that is calculated on both the amount of money invested or borrowed and on the interest that has been added to it: »
Thanks to the power of compound interest, every €1 you invest in your 20s is worth €2 in your 30s and €3 in your 40s.
Financial and business terms. 2012.