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Compound Interest
- interest calculated on the total of the principal and previously calculated interests
- calculated as the difference between the compound amount and the original or principal amount
Compounding Period
- time interval it takes for money to earn interest in a year
1
- annually
2
- semiannually
4
- quarterly
6
- bimonthly
12
- monthly
24
- semimonthly
360
- daily
Nominal Rate
- annual interest rate that does not take into account the compounding period
Periodic Rate
- interest rate per compounding period equal to the nominal rate divided by the number of compounding periods in a year
Compound Amount
- accumulated value of the principal and all interests from prior periods
