What is a key feature of compound interest in relation to exponential functions?

The key feature of compound interest in relation to exponential functions is that it adds interest to the principal repeatedly. This means that the interest earned on an investment is reinvested and earns additional interest over time.

When interest is compounded, each subsequent interest calculation is based on the updated principal, which includes the interest that has already been added. This process creates a growth pattern that resembles an exponential function, as the value grows faster over time compared to simple interest, which is calculated only on the original principal.

This compounding effect leads to a situation where the amount of interest earned increases with each period, causing the total balance to grow exponentially rather than linearly. Therefore, the understanding of compound interest aligns closely with the properties of exponential functions, where growth accelerates as time progresses.