Compound Interest

Lesson 2 of 11 • 9 upvotes • 7:41mins

Rakesh Sud

Time Value of Money- Compound Interest. Method of calculating it is first discussed.Compound interest is applied to the initial sum, plus any previous accumulated interest that has not been paid, for each successive time period for interest. The rationale for compound interest is that the interest is in fact money that should be in hand at the end of the time period for interest, i.e., at the time it is due. Therefore, if that interest is not received, it is, in effect, also lent and therefore should also bear interest.