“A concept of adding accumulated interest back to the principal sothat interest is earned on interest from that moment on” 1 (wikipedia)
The act of declaring interest to be principal is called“compounding”
Simple interest: No compound, pay interest only on what you owe
More compounds in a year will generate more interest
When there are multiple compounds in a year, split the annualinterest rate by the number of compounds in a year
Ie: Interest is compounded montly at 10% interest with a $10,000deposit