Question

What is compound interest?​

Answer 1

Explanation:

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 then earned on the principal sum plus previously accumulated interest.

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Answer 2

Compound interest is interest earned on interest. Compounding occurs when you earn returns on the principal amount and the interest previously earned. In an account where you are earning simple interest, you only get interest on the principal amount. An account that offers compound interest allows interest to be earned over not just the principal, but also the interest you may have earned.

compound interest formula

$p(1 + \frac{r}{n}) {n}{t}$