Interest computed, at regular intervals, on the sum of the principal and
any unpaid interest, is called _compound interest_. In other words, as
soon as interest becomes due and is unpaid, it begins to draw interest
at the same rate as the principal. Compound interest is generally paid
on the deposits in savings banks and is used in calculating amortization
and sinking funds.
Interest may be compounded quarterly, semi-annually, annually, or at the
end of any other period agreed upon. In some States the collection of
compound interest is not permitted.
EXAMPLE: Find the amount and the compound interest of $1200 at 6% for
two years, interest compounded semi-annually.