Compound Interest

Extracted Attributes

• Field

  Finance, Economics

• Benefit

  Earning interest on both the original saved money and any interest earned on that original amount.

• Contrast

  Simple interest, where previously accumulated interest is not added to the principal amount.

• Definition

  Interest accumulated from a principal sum and previously accumulated interest.

• Importance

  Crucial for financial planning, wealth generation, restoring economic hope, and ensuring broader participation in the economy.

• Applications

  Savings accounts, investments (e.g., mutual funds), loans, and credit card debt.

• Growth Factors

  Simple interest rate applied and the frequency at which the interest is compounded.

Compound interest

Compound interest is interest accumulated from a principal sum and previously accumulated interest. It is the result of reinvesting or retaining interest that would otherwise be paid out, or of the accumulation of debts from a borrower. Compound interest is contrasted with simple interest, where previously accumulated interest is not added to the principal amount of the current period. Compounded interest depends on the simple interest rate applied and the frequency at which the interest is compounded.

Web Search Results

• Compound interest - Wikipedia

  Compound interest is interest accumulated from a principal sum and previously accumulated interest. It is the result of reinvesting or retaining interest that would otherwise be paid out, or of the accumulation of debts from a borrower. [...] Compound interest is contrasted with simple interest, where previously accumulated interest is not added to the principal amount of the current period. Compounded interest depends on the simple interest rate applied and the frequency at which the interest is compounded. Compounding frequency --------------------- [edit] [...] The total accumulated value, including the principal sum P{\displaystyle P}Image 12: {\displaystyle P} plus compounded interest I{\displaystyle I}Image 13: {\displaystyle I}, is given by the formula:( n)t n{\displaystyle A=P\left(1+{\frac {r}{n}}\right)^{tn}}Image 14: {\displaystyle A=P\left(1+{\frac {r}{n}}\right)^{tn}} where:

• The Power of Compound Interest: Calculations and Examples

  Compound interest is interest that applies not only to the initial principal of an investment or a loan, but also to the accumulated interest from previous periods. In other words, compound interest involves earning, or owing, interest on your interest. [...] Compound Interest Compound Interest:max_bytes(150000):strip_icc():format(webp)/compoundinterest_final-5c67da5662ba458f8d9d229ab4ca4292.png) Investopedia / Julie Bang ## How Compound Interest Works Compound interest is calculated by multiplying the initial principal amount by one plus the annual interest rate raised to the number of compound periods minus one. The total initial principal or amount of the loan is then subtracted from the resulting value. [...] Compound interest simply means you're earning interest on both your original saved money and any interest you earn on that original amount. Although the term "compound interest" includes the word interest, the concept applies beyond interest-bearing bank accounts and loans, including investments such as mutual funds. ## Who Benefits From Compound Interest?

• Compound Interest Calculator

  Compound interest is when interest you earn on a savings account or investment is rolled back into your balance to earn additional interest. The compound interest calculation accounts for interest you earn over time and adds it back into the amount being invested or saved. So while you are earning interest on your original principal you are also earning interest on accumulated interest. [...] Interest compounding can also happen with loans or credit card debt. In this case you are charged interest on interest that accumulates and is not paid off. Compounding means that interest charged is added to the balance owed so that subsequent interest is calculated from your unpaid balance plus accrued interest. [...] Compound interest is different from simple interest where the interest amount is calculated at the beginning of the investment or loan. Simple interest means that interest earned is not rolled back into the balance for future interest calculations. ### Additional Resources Visit InterestMagician.com for interactive compound interest calculations. There, you can experiment with investment values, interest rates and lengths of deposit and visualize your earnings over time.

• How does compound interest work?

  Consumer Financial Protection Bureau # How does compound interest work? Compound interest is when you earn interest on the money you’ve saved and on the interest you earn along the way. Here’s an example to help explain compound interest. [...] | | Data for your calculations | Explanations | | --- | --- | --- | | Amount you start with | $1,000 | Also called your principal | | How much you earn | 5 percent | Also called your interest rate, or rate of return | | How often you calculate interest | Once a year | Also called your compounding frequency | | Amount after the first year | $1,050 | Amount you started the year with, plus 5 percent 0.05 x $1,000 = $50 $1,000 + $50 = $1,050 | [...] | Amount after the second year | $1,102.50 | Amount you started the year with, plus 5 percent 0.05 x $1,050 = $52.50 $1,050 + $52.50 = $1,102.50 |

• Compound Interest Calculator | Investor.gov

  Calculator ---------- ### Step 1: Initial Investment Initial Investment Amount of money that you have available to invest initially. ### Step 2: Contribute Monthly Contribution Amount that you plan to add to the principal every month, or a negative number for the amount that you plan to withdraw every month. Length of Time in Years Length of time, in years, that you plan to save. ### Step 3: Interest Rate Estimated Interest Rate Your estimated annual interest rate. [...] Interest rate variance range Range of interest rates (above and below the rate set above) that you desire to see results for. ### Step 4: Compound It Compound Frequency Times per year that interest will be compounded. Next Steps ---------- ### Take our quiz on compound interest Image 5: Quest Mark icon Test your knowledge of compound interest, the Rule of 72, and related investing concepts in our most popular investing quiz! There’s a trick question – can you spot it? [...] Breadcrumb ---------- 1. Home Main navigation --------------- Compound Interest Calculator Calculadora de distribución mínima requerida Calculadora de interés compuesto Savings Goal Calculator Calculadora de objetivo de ahorro Required Minimum Distribution Calculator College Savings Calculator Compound Interest Calculator ============================ Determine how much your money can grow using the power of compound interest. \ DENOTES A REQUIRED FIELD

• Instance Of

  Q35127

• Inception Date

  12/1/2013