Maths Dictionary · SS 3
Compound interest
Simple meaning
Interest that is added to your money each year, so next year you earn interest on the interest too.
Example
₦100,000 at 10% for 2 years grows to ₦121,000.
See it
From the Compound Interest lesson. Try moving things around.
Simple interestPrincipalSame as simpleInterest on interest
Principal P₦100,000
Rate r10%
Years n2
A = ₦100,000 × 1.12 = ₦121,000
Year 2: ₦110,000 + ₦11,000 (10% of last year's total, not of ₦100,000)
Interest = A − P = ₦21,000 · simple interest would give only ₦20,000
Multiplier 1 + 10/100 = 1.1 · amounts rounded to the nearest kobo