Texas Instruments BA II PLUS User Manual page 37

Compound Interest
Many lending institutions add the interest you earn to the
principal. The interest you earn from the previous compounding
period becomes part of the principal for the next compounding
period. Compound interest enables you to earn a greater
amount of interest on your initial investment.
In order to earn compound interest, the interest must remain
with the principal. For example, if you invest $100 at an annual
interest rate of 10% compounded annually, you earn $10 interest
after one year. At the end of the second year, the interest is
calculated on $110 ($100 principal plus $10 accumulated
interest), so you earn $11 in the second year. As additional
interest accumulates, your interest earnings increase each year.
2: TVM and Amortization Worksheets 31