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What does Compound Interest mean?

Compound interest is interest that is added to the initial investment, or 'principal' of a deposit, so that the investment plus the added interest also earns interest from then on.

For example, you will earn interest as follows -


Month 1: earn Interest on your Initial Investment

Month 2: earn Interest on your Initial Investment plus the Interest from Month 1

Month 3: earn Interest on Initial Investment, plus all the Interest earned from Month 1 and Month 2

... and so this continues.

For numerical examples of compound interest, click here.

 

You can also find out more about Compounding Interest from the following external link - http://www.investopedia.com/terms/c/compoundinterest.asp 

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