Compounding interest is a interest that’s paid on interest that’s already been earned. When you put money into certain types of accounts and investments, that money earns interest at a certain rate.
The interest you earn in the first year is added to the total balance and that new balance earns interest in the second year. So, you’re earning interest on money you never even contributed – your interest has compounded.
Read More: http://interestrates.us/the-time-factor-with-compound-interest/
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