Compound Interest

Compound interest means the interest applied not only to the principal but also to the accrued interest from the past. It is commonly known as interest on interest and may apply to loans or deposits.

For instance, say you invest ₹.100 in a fixed deposit for 3 years. In the first year, say you earn ₹.10 as interest. With compound interest, the interest in year two is calculated at Rs.110 and not Rs.100. This way, compound interest allows you to earn more.

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