Investment Glossary
Compound
Interest - Interest earned on an original amount of money,
commonly called the principle, along with interest earned on previously earned
interest.
For example, if you deposit $1000 into a savings account earning 5%
interest, at the end of the first year you will have $1050 in that account.
The following year, you will be earning interest on that entire amount, $1050,
for a total of $1102.50. After 30 years, your original $1000 investment would
be worth over $4,000 without you ever having to do a thing.
