Interest earned on an investment that is added to the original amount of the investment. In the future, interest payments are then calculated and paid on the increased value of the investment. In other words, you are receiving interest paid upon interest. For example, if you invested $10,000 at 8%, you would earn $800 in interest in the first year. In the second year, you would earn an additional $64 in interest on the $800 interest earned in the first year. The $64 is called the compound interest.
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