Definition for: Compound Interest
"Compound interest" refers to the process of adding interest to the principal of a loan and allowing, in effect, the interest to earn more interest. For example, if you invest $10,000 and you receive a 6% interest rate on your investment, you will have $10,600 at the end of the first year (assuming yearly compounding), and if the $600 is reinvested at the same rate, the 6% interest on the principal for year 2 will be $636 (6% x $10,600).
