Compound Interest

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Compound interest refers to the interest that is earned on both the principal amount and any accumulated interest on investment over time.

In other words, compound interest is interest that is paid not only on the initial amount of an investment but also on any interest that has been earned and reinvested over time.

This can result in the exponential growth of an investment over the long term. The effect of compounding can be significant over long periods of time, as even small differences in interest rates or investment amounts can compound to produce large differences in investment returns.

Compound interest is a key concept in personal finance and can be used to help individuals plan for long-term financial goals such as retirement or college savings. It is also commonly used in financial calculations and investments such as savings accounts, certificates of deposit, and mutual funds.

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