Understanding Compound Interest

Simple Interest is calculated one time solely as a percentage of the principal sum. As an example, if the principle is $100, and the interest rate is 4%, the value at the end of the interest period (e.g. monthly, quarterly, semi-annually, annually) would be $104 (100 x 1.04). Conversely, Compound Interest is calculated not only on the initial principal but also the accumulated interest of prior periods. Using the prior example, the value at the end of the first period is $104, which now becomes the principal at the beginning of the second period. Therefore, at Read the Full Story