Compound interest is interest calculated on the principal amount, to which interest earned to-date has been added. Where compound interest is applied, the investment grows exponentially and not linearly as in the case of simple interest.
In finance, interest is a fee paid for the use of another party’s money. To the borrower it is the cost of renting money, to the lender the income from lending it. Interest on all debt is normally deductible before taxes are assessed on a company’s income.