Final answer:
Compound interest refers to the interest that is earned on past interest, and it causes the total amount of financial savings to grow dramatically over time. It is an important concept in financial calculations.
Step-by-step explanation:
Compound interest refers to the interest that is earned on past interest. It causes the total amount of financial savings to grow dramatically over time. Compound interest is different from simple interest, which is an interest rate calculation only on the principal amount. Compound interest involves calculating interest on the principal amount plus the accumulated interest. The formula for compound interest is Future Value = Principal x (1 + interest rate)^time. Compound interest is an important concept in financial calculations.