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Question

Does compound interest have more of an impact for short-term investments or long-term investments? Why?

Answer

Well done! It's great to see that you understand the significance of compound interest when it comes to long-term investments. Compound interest enables investors to earn interest not only on their principal amount, but also on the interest earned in past periods. As a result, the longer the term of investment, the greater the accumulation of interest through compound interest. However, in the short term, the impact of compounded interest may not be as significant due to lower interest rates.