Both Uses of
compound interest
in
Bleak House
- Foot passengers, jostling one another's umbrellas in a general infection of ill temper, and losing their foot-hold at street-corners, where tens of thousands of other foot passengers have been slipping and sliding since the day broke (if this day ever broke), adding new deposits to the crust upon crust of mud, sticking at those points tenaciously to the pavement, and accumulating at compound interest.†
Chpt 1-3
- The name of this old pagan's god was Compound Interest.†
Chpt 19-21 *
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.