The monthly payment of Gerritt is $513.86.
Compounding is the addition of interest to the principal of a loan or deposit, or in other words, interest on principal plus interest. It is the result of reinvesting interest, either adding to the loan principal instead of repaying the loan or requiring the borrower to pay it so that the next period's interest is calculated on the principal plus previously accrued interest. Compound interest is the norm in finance and economics.
Compound interest is the opposite of simple interest, where previously accrued interest is not added to the principal amount of the current period, so there is no compounding. The annual interest rate is simply the amount of interest per period multiplied by the number of periods per year. The simple annual interest rate is also known as the nominal interest rate (not to be confused with the non-inflation adjusted interest rate, which shares the same name).
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