compound interest
Americannoun
noun
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Interest computed on the original principal plus any accrued interest. Thus if 5% is the rate of interest per year and the principal is $1000, the compound amount after one year will be $1050, after two years it will be $1050 × 0.05 = $1102.50, after three years it will be $1102.50 × 0.05 = $1157.63, and so forth. Mathematically, if P is the original principal and I the rate of interest expressed as a decimal, the compound amount at the end of the n th year will be P (1 + I) n. The growth of the compound amount is exponential and not linear.
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Compare simple interest
Etymology
Origin of compound interest
First recorded in 1650–60
Example Sentences
Examples are provided to illustrate real-world usage of words in context. Any opinions expressed do not reflect the views of Dictionary.com.
“Matches for low-income workers significantly alter savings behavior. A small amount of financial assistance can encourage those previously excluded from wealth building to start saving, allowing the power of compound interest to work.”
From MarketWatch
“Matches for low-income workers significantly alter savings behavior. A small amount of financial assistance can encourage those previously excluded from wealth building to start saving, allowing the power of compound interest to work.”
From MarketWatch
Liu believes that compound interest and the financial markets create opportunities for anyone.
Investing, for them, is a way to regain some certainty—with the magic of compound interest.
Such a delay could rob people of years of contributions, employer matches and compound interest.
From MarketWatch
Definitions and idiom definitions from Dictionary.com Unabridged, based on the Random House Unabridged Dictionary, © Random House, Inc. 2023
Idioms from The American Heritage® Idioms Dictionary copyright © 2002, 2001, 1995 by Houghton Mifflin Harcourt Publishing Company. Published by Houghton Mifflin Harcourt Publishing Company.
