What is compound interest? What is the compound interest formula and how to calculate compound interest?

What is compound interest?

Compound interest is the increase in interest earned on an investment because previously earned interest increases the principal. In other words, this is interest calculated on both the principal and the accumulated interest.

For example, you deposit 10 million VND in the bank with an interest rate of 10%/year, monthly profit. After 1 year, you will receive a total of 11,000,000 VND, of which 10 million VND is principal and 1 million VND is interest.

If you continue to deposit this 11 million VND in the bank with an interest rate of 10%/year monthly interest, then after the next 1 year, you will receive a total of 12,100,000 VND, of which 11 million VND is the principal and 1,100,000 VND. profit.

Quyen is a creative copywriter with a passion for fintech. a degree from the Ho Chi Minh University of Economics. After graduating from the UEH (Ho Chi Minh Economics of University), she's constantly expanding her knowledge through investment and financial literacy courses, seminars, and conferences. Quyen also has experience in banking and credit. Her articles draw on her background in finance to help readers make informed decisions.