# Compound interest

See Compound Interest – Wikipedia

compound interest : 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. Compound interest is standard in finance and economics.

Compound interest is contrasted with *simple interest* , where previously
accumulated interest is not added to the principal amount of the current period,
so there is no compounding. The *simple annual interest rate* is the interest
amount per period, multiplied by the number of periods per year. The simple
annual interest rate is also known as the nominal interest rate (not to be
confused with the interest rate not adjusted for inflation, which goes by
the same name).