Compound interest, is the interest calculated on the initial principal and also on the accumulated interest of previous periods of a deposit or loan. It is popularly also called as the "interest on interest."

The rate at which compound interest accrues depends on the frequency of compounding, which range from monthly, quarterly, semi-annually and annually. The higher the number of compounding periods, the greater the interest value.

On the contrary, simple interest is calculated only on the principal amount.