Definition of compound
transitive verb
1 : to put together (parts) so as to form a whole : combine compound ingredients … a thick sauce compounded of chilies, garlic, and ginger. — Andy Birsh
2 : to form by combining parts compound a medicine
3a : to settle amicably : adjust by agreementb : to agree for a consideration not to prosecute (an offense) compound a felony
4a : to pay (interest) on both the accrued interest and the principalb : to add to : augment compound an error … had several other medical complications that compounded his condition. — Jeffrey S. Hollis
intransitive verb
1 : to become joined in a compound
2 : to come to terms of agreement compounded with the enemy for peace
compounder
nounExplore Merriam-Webster
Examples of compound in a Sentence
The interest is compounded at regular intervals.
we compounded our error by waiting too long to call for help
Origin and Etymology of compound
Middle English compounen, from Anglo-French *cumpundre, from Latin componere, from com- + ponere to put — more at position
Definition of compound
1 : composed of or resulting from union of separate elements, ingredients, or parts: such asa : composed of united similar elements especially of a kind usually independent a compound plant ovaryb : having the blade divided to the midrib and forming two or more leaflets on a common axis a compound leaf
2 : involving or used in a combination
3a of a word : constituting a compound (see 3compound 1)b of a sentence : having two or more main clauses
Examples of compound in a Sentence
“Steamboat” is a compound noun.
“I told him to leave and he left” is a compound sentence.
Origin and Etymology of compound
Middle English compouned, past participle of compounen —see 1compound
Definition of compound
1a : a word consisting of components that are words (such as rowboat, high school, devil-may-care)b : a word (such as anthropology, kilocycle, builder) consisting of any of various combinations of words, combining forms, or affixes
2 : something formed by a union of elements or parts; especially : a distinct substance formed by chemical union of two or more ingredients in definite proportion by weight a new antibiotic compound
Origin and Etymology of compound
see 2compound
Definition of compound
: a fenced or walled-in area containing a group of buildings and especially residences a prison compound an embassy compound
Origin and Etymology of compound
by folk etymology from Malay kampung group of buildings, village
Financial Definition of COMPOUND
compound
What It Is
In finance, to compound means to earn interest on principal plus interest that was earned earlier.
How It Works
You have $100 to open a savings account at XYZ Bank on January 1. The annual interest rate is 5%. How much will you have in five years?
Well, if the bank simply gave you 5% of your $100 at the end of the year, you would have $105 on December 31. If you left the $105 in the account to earn another 5% next year, at the end of that second year, you would have: $105 x 1.05 = $110.25. Not only did you earn interest on your original $100 in year two, you earned interest on year one's interest. That is, it compounded. If you carried this out another eight years, here's what your account might look like:
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At the end of 10 years, you would have $162.89 in the account just for doing nothing. But it gets better. The example above assumes the bank pays interest on the balance at the end of the year (that is, the interest compounded annually). In the real world, a bank would usually pay you interest on your account balance at the end of every month (that is, the interest compounds monthly). The bank simply divides the annual interest rate (5% in our case) by 12 months, and applies that rate to your balance at the end of each month. So in year one, let's see what happens:
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Notice that when the bank compounded the balance annually, you only had $105.00 at the end of year one. But if the bank compounds monthly, you have $105.12 at the end of year one. It may not sound like much, but consider the effect on a $500,000 beginning balance: At the end of 10 years, the investor has $814,447.13 if the interest compounds annually, but she has $823,504.75 -- a full $9,057.62 more -- if the interest compounds monthly.
Compounding doesn't just affect how much interest investors earn; it affects how much interest investors pay. For example, if that $1,000 savings account had really been a $1,000 loan to you from XYZ Bank, the amount of interest you pay would be influenced by how often the bank compounded the rate. The important lesson here is that the more frequently compounding occurs, the more interest is earned (or paid) on a balance. Some credit cards even compound interest daily, which greatly affects the borrower's balance owed.
Why It Matters
The financial world often refers to compounding as "magic" because it is one of the most fundamental ways to build wealth yet takes the least amount of effort. But because of the variety of interest calculation methods out there, borrowers should compare lender offers, and investors should compare investment offers by carefully reading the disclosure accompanying those offers. Investors are well served to understand how an institution’s choice of interest-calculation methods affect the amount of interest applied to the investor’s account. Depending on the anticipated activity, the borrower might save money and the investor might make more money by preferring one calculation method to another.
This InvestingAnswers story features a real-life example of how compounding can work for you: How One Normal Lady Turned $200 into $7 Million.
COMPOUND Defined for English Language Learners
compound
playDefinition of compound for English Language Learners
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: to make (something, such as an error or problem) worse : to add to (something bad)
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finance : to pay interest on both an amount of money and the interest it has already earned
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: to form (something) by combining separate things
compound
playDefinition of compound for English Language Learners
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: made up of two or more parts
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: made by combining two or more words
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: consisting of two or more main clauses
COMPOUND Defined for Kids
Definition of compound for Students
compounded
;compounding
1 : to form by combining separate things compound a medicine
2 : to make worse compound a problem
3 : to pay (interest) on both an original amount of money and on the interest it has already earned
Definition of compound for Students
: made of or by the union of two or more parts a compound leaf with three leaflets
Definition of compound for Students
1 : a word made up of parts that are themselves words The words “rowboat” and “hide-and-seek” are compounds.
2 : something (as a chemical) that is formed by combining two or more parts or elements
Definition of compound for Students
: an enclosed area containing a group of buildings
Medical Dictionary
Medical Definition of compound
: to form by combining parts compound a medicine
Medical Definition of compound
: something formed by a union of elements or parts; specifically : a distinct substance formed by chemical union of two or more ingredients in definite proportion by weight
Law Dictionary
compound
playLegal Definition of compound
1 : to agree for a consideration not to prosecute (an offense) Editor's note: Compounding a felony is a common-law crime.
2 : to pay (interest) on both the accrued interest and the principal
Learn More about compound
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See words that rhyme with compound Thesaurus: All synonyms and antonyms for compound Spanish Central: Translation of compound Nglish: Translation of compound for Spanish speakers Britannica English: Translation of compound for Arabic speakers Britannica.com: Encyclopedia article about compound
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