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 By way of an example, a bank account from which the money will never be withdrawn and for which the interest rate will not vary will have a certain amount Yt at a time t. It will subsequently have a higher amount Yt+1 at a time t+1, the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’).