Answer:
Compound interest is best defined as:
Earning interest on interest.
Compound interest is earning interest on interest.
Compound interest is an interest accumulated on the principal and interest together over a given time period. The interest accumulated on a principal over a period of time is also accounted under the principal. Further, the interest calculation for the next time period is on the accumulated principal value. Compound interest is the new method of calculation of interest used for all financial and business transactions across the world. The power of compounding can easily be understood, when we observe the compound interest values accumulated across successive time periods.
Compound Interest = Interest on Principal + Compounded Interest at Regular Intervals
The compound interest is calculated at regular intervals like annually(yearly), semi-annually, quarterly, monthly, etc; It is like, re-investing the interest income from an investment makes the money grow faster over time! It is exactly what the compound interest does to the money. Banks or any financial organization calculate the amount based on compound interest only.
as, we know that Compound interest is an interest accumulated on the principal and interest together over a given time period.
So, we can also write Earning interest on interest.
learn more about compound interest here:
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