WROC Rochester First
CPA Dave Young discussed the benefits and drawbacks of compound interest Monday on News 8 at Sunrise. Young explained compound interest is calculated on the initial principal and also the on the accumulated interest of previous periods of a deposit or loan. Compound interest can be thought of as "interest on interest," and will make a deposit or loan grow at a faster rate than simple interest, which is interest calculated only on the principal amount. The rate at which compound interest accrues depends on the frequency of compounding; the higher the number of compounding periods, the greater the compound interest.