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Compound interest |
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Compound interestInterest paid on previously earned interest as well as on the principal.Compound interestThe interest paid on the principal balance in a mortgage and on the accrued and unpaid interest of the loan.Compound interestThe process by which interest earned on an investment is added back to the amount invested, so increasing the amount of 'principal' on which further interest will be earned in future years.Compounding is sometimes described as the miracle of investing. The fact is that if you reinvest income in your portfolio, you will end up with a much larger amount than if you spend the income as you go along because of the effect of compounding. But to allow compounding to work its magic, you have to start young.Albert Einstein, when asked what he considered to be mankind's greatest invention, replied 'Compound interest!'Similar MatchesCompoundingCompoundingThe process of accumulating the time value of money forward in time. For example, interest earned in one period earns additional interest during each subsequent time period. Compound annual growth rateCompound annual growth rateThe average rate at which a particular financial parameter compounds up over a period of years. Compound reversionary bonusCompound reversionary bonusA with profits life assurance bonus, normally added annually to the policy, which is based on the profits of the life company's investments.The compound reversionary bonus is normally calculated on the sum assured (or basic sum assured) plus bonuses to date and is payable at the maturity of the policy or prior death. Once declared, reversionary bonuses are guaranteed. Continuous compoundingContinuous compoundingThe process of accumulating the time value of money forward in time on a continuous, or instantaneous, basis. Interest is earned constantly, and at each instant, the interest that accrues immediately begins earning interest on itself. Simple compound growth methodSimple compound growth methodCalculating a growth rate by relating terminal value to initial value and assuming a constant percentage annual rate of growth between the two values. Further SuggestionsCompound optionCompound tariff Compound Annual Growth Rate Compounding period Compound Annual Return Discrete compounding Compounding frequency Compound growth rate Realized compound yield |
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