Compound interest is the addition of interest to the principal sum of a loan or deposit. In other words, it's the interest calculated on the initial principal and also on the accumulated interest of previous periods.
Let's use it in a practical example:
Let's assume that Bella has saved $1,000.00 dollars from her allowances and then decides to make a fixed deposit at her local Bank who promised to pay her 10% annual interest rate in return, compounded annually, for using her money. If Bella had to leave that money at the Bank for two (2) years, at the end of period she would have saved around $1,210.00 dollars.
