How does compound interest work?

Compound interest begins with an initial sum of money deposited or invested.

Interest Calculation

Interest is calculated not only on the initial amount but also on the accumulated interest from previous periods.

Compounding Periods

The compounding period can be daily, monthly, quarterly, or annually, affecting how often interest is added to the principal.

Higher Returns

Compared to simple interest, compound interest results in higher returns due to the effect of earning interest on interest.