Compound interest adds interest to principal so later interest can accrue on both. At a hypothetical fixed 5% compounded annually, 100 units become 105 after one year and 110.25 after two, with no withdrawals, fees or tax. Borrowing can compound too, depending on the contract. It ranks near the top because time changes the arithmetic; the example describes a calculation, not an available or guaranteed investment return.
Source: Compound interest.
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