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Compound Interest

The concept of earning
on interest. For example, consider a $10,000 investment with a 3% annual interest rate. This investment would increase by 3% of $10,000 ($300) to $10,300 by the end of the first year. The second year it would increase by 3% of $10,300 ($309) to $10,609. The third year it would increase by $318.27 to $10,927.27 and so on. Notice how each year the total interest accrued becomes larger and larger – this is the power of interest on interest otherwise known as compound interest.

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