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What is Compound Interest?

Whenever a person takes out a loan, secures finance for a venture or refinances an asset, there is always a clause regarding the interest that the principal amount will accrue during the finance period. When the interest on the primary account is accrued and then added to the primary amount before the next interest is calculated, you are dealing with compound interest – In other words interest on interest. You are no longer working with just the primary amount and random interest. You’re dealing with an amount of money that is added to the primary fund and is then used as the basis of the next interest calculation.

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