The essentials2 min read
Compound interestGerman: Zinseszins
Compound interest occurs when earned interest is reinvested and generates further interest in later periods.
In plain language
At a constant annual rate: final amount = principal × (1 + rate) raised to the number of years. Time, rate and reinvestment determine the effect. Investment returns can also compound, but unlike a constant-rate model they fluctuate.
Let’s make it concrete
€1,000 at 5% becomes €1,050 after one year. The second year adds €52.50: the first €50 also earns interest.
Simplified example for illustration.Worth understanding
A constant calculator rate is an assumption. Fluctuations, fees, taxes and inflation change the real outcome.
Read more from official sources
For further learning and reference:
Financial education for orientation. No individual investment, tax or legal advice.
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