Discrete compounding refers to the method by which interest is calculated and added to the principal at certain set points in time. For example, interest may be compounded weekly, monthly, or yearly.

Carol M. Kopp edits features on a wide range of subjects for Investopedia, including investing, personal finance, retirement planning, taxes, business management, and career development. Betsy began ...

If you’re buying your first home or getting ready to invest in securities for the first time, you probably have a lot of questions. The first and most important should be, “How do interest rates work?