Le site de vulgarisation scientifique de l’Université de Liège. ULg, Université de Liège
compound interest

In economics compound interest represents the regular and exponential evolution of capital. By way of an example, a bank account from which the money will never be withdrawn and for which the interest rate will not vary will have a certain amount Yt at a time t. It will subsequently have a higher amount Yt+1 at a time t+1, the interest being proportional to the value of Yt; thus interest also generates interest (hence the adjective ‘compound’).

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