compound

verb

com·pound | \ käm-ˈpau̇nd,

kəm-ˈpau̇nd, ˈkäm-ˌpau̇nd\

compounded; compounding; compounds

Definition of compound

(Entry 1 of 4)

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 agreement

b : to agree for a consideration not to prosecute (an offense) compound a felony

4a : to pay (interest) on both the accrued interest and the principal

b : 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

compound

adjective

com·pound | \ ˈkäm-ˌpau̇nd,

käm-ˈpau̇nd, kəm-ˈpau̇nd\

Definition of compound (Entry 2 of 4)

1 : composed of or resulting from union of separate elements, ingredients, or parts: such as

a : composed of united similar elements especially of a kind usually independent a compound plant ovary

b : 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 : made by combining two or more words : constituting a compound (see compound entry 3 sense 1) "Steamboat" is a compound noun.

b of a sentence : having two or more main clauses

compound

noun (1)

com·pound | \ ˈkäm-ˌpau̇nd

Definition of compound (Entry 3 of 4)

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

compound

noun (2)

com·pound | \ ˈkäm-ˌpau̇nd

Definition of compound (Entry 4 of 4)

: a fenced or walled-in area containing a group of buildings and especially residences a prison compound an embassy compound

Other Words from compound Synonyms & Antonyms More Example Sentences Learn More about compound

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Examples of compound in a Sentence

Verb

The interest is compounded at regular intervals. we compounded our error by waiting too long to call for help

Adjective

“Steamboat” is a compound noun. “I told him to leave and he left” is a compound sentence.

First Known Use of compound

Verb

14th century, in the meaning defined at transitive sense 1

Adjective

14th century, in the meaning defined at sense 1

Noun (1)

1530, in the meaning defined at sense 1a

Noun (2)

1679, in the meaning defined above

History and Etymology for compound

Verb

Middle English compounen, from Anglo-French *cumpundre, from Latin componere, from com- + ponere to put — more at position

Adjective and Noun (1)

Middle English compouned, past participle of compounen — see compound entry 1

Noun (2)

by folk etymology from Malay kampung group of buildings, village

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Dictionary Entries near compound

Statistics for compound

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Time Traveler for compound

The first known use of compound was in the 14th century

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More Definitions for compound

compound

verb

Financial Definition of 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:

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:

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.

Source: Investing Answers

compound

verb

English Language Learners Definition of compound

(Entry 1 of 2)

: to make (something, such as an error or problem) worse : to add to (something bad)

finance : to pay interest on both an amount of money and the interest it has already earned

: to form (something) by combining separate things

compound

adjective

English Language Learners Definition of compound (Entry 2 of 2)

: made up of two or more parts

: made by combining two or more words

: consisting of two or more main clauses

See the full definition for compound in the English Language Learners Dictionary

compound

verb

com·pound | \ käm-ˈpau̇nd

compounded; compounding

Kids Definition of compound

(Entry 1 of 4)

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

compound

adjective

com·pound | \ ˈkäm-ˌpau̇nd

Kids Definition of compound (Entry 2 of 4)

: made of or by the union of two or more parts a compound leaf with three leaflets

compound

noun

com·pound | \ ˈkäm-ˌpau̇nd

Kids Definition of compound (Entry 3 of 4)

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

compound

noun

com·pound | \ ˈkäm-ˌpau̇nd

Kids Definition of compound (Entry 4 of 4)

: an enclosed area containing a group of buildings

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compound

transitive verb

com·pound | \ käm-ˈpau̇nd, kəm-ˈ, ˈkäm-ˌ

Medical Definition of compound

(Entry 1 of 3)

: to form by combining parts compound a medicine

compound

adjective

com·pound | \ ˈkäm-ˌpau̇nd, käm-ˈ, kəm-ˈ

Medical Definition of compound (Entry 2 of 3)

: composed of or resulting from union of separate elements, ingredients, or parts a compound substance compound glands

compound

noun

com·pound | \ ˈkäm-ˌpau̇nd

Medical Definition of compound (Entry 3 of 3)

: 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