# compound interest

## compound interest

noun
interest paid on both the principal and on accrued interest.

Origin:
1650–60

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World English Dictionary
 compound interest —n Compare simple interest interest calculated on both the principal and its accrued interest

Collins English Dictionary - Complete & Unabridged 10th Edition
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American Heritage
Science Dictionary
 compound interest   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 nth year will be P(1 + I)n. The growth of the compound amount is exponential and not linear. Compare simple interest.
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American Heritage
Cultural Dictionary

### compound interest definition

Interest that is added not only to the principal of a loan or savings account but also to the interest already added to the loan or account; interest paid on interest.

The American Heritage® New Dictionary of Cultural Literacy, Third Edition