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Answer:

Interest-on-interest, also referred to as 'compound interest', is the interest that is earned when interest payments are reinvested.

Sans3341
  • Interest-on-interest, also referred to as 'compound interest', is the interest that is earned when interest payments are reinvested.

  • It is primarily used in the context of bonds, whose coupon payments are assumed to be re-invested and held until sale or maturity.

  • Interest-on-interest applies to the principal amount of the bond or loan and to any other interest that has previously accrued.

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