About Compound Interest

Compound interest is the addition of interest to the principal sum of a loan or deposit, or in other words, interest on interest. It is the result of reinvesting interest, rather than paying it out, so that interest in the next period is earned on the principal sum plus previously accumulated interest.

The Power of Compounding

The power of compounding is particularly noticeable over long investment periods. Even small increases in the interest rate can make a significant difference to the final amount due to the exponential nature of compound growth.