Both Uses of
compound interest
in
Ulysses by James Joyce
- They could easily have big establishments whole thing quite painless out of all the taxes give every child born five quid at compound interest up to twentyone five per cent is a hundred shillings and five tiresome pounds multiply by twenty decimal system encourage people to put by money save hundred and ten and a bit twentyone years want to work it out on paper come to a tidy sum more than you think.†
Chpt 8 *
- A Spanish prisoner's donation of a distant treasure of valuables or specie or bullion lodged with a solvent banking corporation loo years previously at 5% compound interest of the collective worth of 5,000,000 pounds stg (five million pounds sterling).†
Chpt 17
Definition:
-
(compound interest) interest calculated on both the initial amount and on previous interest earned
(Example: $100 invested at 10% interest would earn $10 per year, but if interest is compounded annually, it would earn $11 the second year.)editor's notes: The more frequently interest is compounded, the more it will add up. Before computers were common, banks typically compounded balances each quarter. Today, it is easy to compound daily or even instantaneously (that is every instant); though increments in compounding frequency bring diminishing returns.
To compare rates with different compounding frequency, rates are often converted to an "Effective Annual Rate" (that is the equivalent rate if compounding were done annually); though the definition of this term is not universal.
When looking at loans, United States law creates a universal term, "Annual Percentage Rate (APR)" that converts a loan to it's equivalent cost if it were compounded annually. The APR also adjusts upward to reflect lender fees.