this interest is computed on the principal and also on the accumulated past interests

The statement you provided describes the concept of compound interest. Here's a step-by-step explanation:

1. Principal: This is the original amount of money that is either borrowed or saved/invested.

2. Interest: This is the amount charged by a lender to a borrower for the use of assets. In the case of savings or investments, it's the money earned over time.

3. Compound Interest: This is the interest on a loan or deposit calculated based on both the initial principal and the accumulated interest from previous periods.

4. Calculation: Compound interest is calculated by multiplying the initial principal amount by one plus the annual interest rate raised to the number of compound periods minus one. The formula for compound interest is A = P (1 + r/n) ^ nt, where:

   • A = the amount of money accumulated after n years, including interest.
   • P = principal amount (the initial amount of money)
   • r = annual interest rate (in decimal)
   • n = number of times that interest is compounded per year
   • t = time the money is invested for, in years.

5. Over time, compound interest will make a sum of money grow at a faster rate than simple interest, which is calculated only on the principal amount.