By Islam BarakaDefinitions
In plain terms
When earned interest joins the interest-bearing balance, later periods can earn interest on that addition.
Technical
For periods without external flows, an ideal unrounded recurrence is P(k+1)=P(k)*(1+i(k)); the D30 profile separately declares capitalization and rounding.
Scope
Frequency, rate basis, flows and rounding must be specified before computing a product result.
Formula
P(k+1) = P(k) * (1 + i(k)) (no external flows, ideal unrounded periods)P_{k+1}=P_k(1+i_k)| Symbol | Meaning | Unit |
|---|---|---|
P_k | interest-bearing principal before period k | currency units |
i_k | effective interest rate for period k | dimensionless fraction |
Output unit: currency units
Examples
- Synthetic principal 100 at 1% per period becomes 101, then 102.01 before currency rounding.
Common misconceptions
- A larger displayed balance alone does not reveal the compounding schedule.
Concept relationships
Prerequisites
Related
Where this concept is used
Evidence and governance
- How does compound interest work? Consumer Financial Protection Bureau · first party technical publication
Supports: preferred label, short definition, variant distinction
Limits: Illustrative education; actual product frequency, rates, fees and rounding require separate terms.
- D30 glossary teaching-profile scope, Batch 013 The Fintech Builder · internal governed contract
Supports: technical definition, formula, units
Limits: No independent regulatory mandate, real-bank dataset, service execution, external witness or production assurance is claimed.
- Reviewed by
- fintech-builder-batch-013
- Last reviewed
- 2026-10-27
- Next review
- 2027-10-27
- Record status
- evidence reviewed
This record is evidence-reviewed and readable, but not yet promoted to published — it is served noindex,follow and excluded from the sitemap.