Compounding


Definition of "Compounding"

Paying interest on interest. The process adds earned interest to the principal so that interest is figured on a progressively larger amount.

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Popular Real Estate Terms

Simple Interest

A transaction in which interest is not paid on interest there is no compounding. For example, if you deposit $1,000 in an account that pays 5% a yea ...

Effective Interest Rate

Real rate of interest on a loan. It is the coupon rate divided by the net proceeds of the loan. Assume Sharon took out a $1,000,000, on year, 10% di ...

Zero Coupon Bonds

Bonds that are sold at discount from their maturity value with the interest compounding and paid at the bond's maturity date. Even though these bonds ...

Effective Rate Of Return

Real rate of interest on a loan. It is the coupon rate divided by the net proceeds of the loan. Assume Sharon took out a $1,000,000, on year, 10% di ...

Individual Retirement Account Plus (ira Plus)

Proposal, endorsed by then-President Bush and Secretary of the Treasury Nicholas Brady, which expands in a significant manner the number of individual ...

Truth-in-savings Act

Act passed by Congress in 1991, the purpose of which is to make it easier for consumers to compare deposit accounts among savings institutions (SI). S ...

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