FAQ About Interest

What is compounding interest? Interest
one year ago | gizem

What is compounding interest?

Compound interest is the calculation of the interest rate by adding the value of the first interest to your principal when you will receive interest again after the interest you receive on your principal.

You get interest on the interest from previous years.

For example, let's say you deposit 100 units of money in a bank with an interest rate of 5%. The next year your principal will be 105 units of money. Since your principal is 105 units when interest is added again the next year, 5% of 105 will be added to your principal, and so on.