Compound interest is interest calculated on the initial principal as well as on the accumulated interest from previous periods.
Detailed Explanation
Compound interest is a powerful financial concept where interest is earned not only on the original investment or loan amount (principal) but also on the interest accumulated over time. It is commonly used in savings accounts, fixed deposits, mutual funds, and long-term investments. The more frequently interest is compounded, the higher the final amount grows.
Example
"If you invest ₹50,000 at 10% annual compound interest for 5 years, the total value will be approximately ₹80,526."