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What is compound interest? (Teachers, Classroom Resources)

U.S. Securities and Exchange Commission, Investor.gov

Claims Supported by This Source

  1. Compound interest is interest earned on interest. $100 at 5% per year becomes $105 after one year and $110.25 after two years. Without additional contributions, it grows to over $162 in 10 years and nearly $340 in 25 years.
  2. The Rule of 72: Divide 72 by the interest rate to find the approximate number of years it will take for the principal to double (e.g., about 8 years at 9%).

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