What Is ยท Finance
Compound Interest
Interest on interest growth
Compound interest grows balances exponentially when interest is added back to principal each period.
- principal
- rate
- compounding frequency
- growth
- time-value
Mechanism
Interest is calculated each period on principal plus accumulated interest.
Variables
Growth depends on rate, frequency, and time horizon.
Uses
Retirement accounts, loans, and savings products rely on compounding.