Compound Interest

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Related to Compound Interest: simple interest

Compound Interest

Interest generated by the sum of the principal and any accrued interest.

Interest is normally compounded on a daily, quarterly, or yearly basis. The more often interest is compounded, the larger the principal will grow and the greater the interest the new principal will produce.

West's Encyclopedia of American Law, edition 2. Copyright 2008 The Gale Group, Inc. All rights reserved.

compound interest

n. payment of interest upon principal and previously accumulated interest which increases the amount paid for money use above just simple interest. Thus, it can increase more rapidly if compounded daily, monthly or quarterly. The genius physicist Albert Einstein called compound interest man's "greatest invention." Most lenders agree. (See: interest, promissory note)

Copyright © 1981-2005 by Gerald N. Hill and Kathleen T. Hill. All Right reserved.

COMPOUND INTEREST. Interest allowed upon interest; for example, when a sum of money due for interest, is added to the principal, and then bears interest. This is not, in general, allowed. See Interest for money.

A Law Dictionary, Adapted to the Constitution and Laws of the United States. By John Bouvier. Published 1856.
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