If a lender or depositor earns interest income on both the principal amount of and on any accumulated interest on the loan or deposit, this is known as:

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Compound interest is the interest on a loan or deposit calculated based on both the initial principal and the accumulated interest from previous periods. This means that the interest earned in each period is added to the principal, so that the balance doesn't merely grow linearly (as with simple interest) but exponentially.

If a Lender or Depositor Earns Interest Income on Both