An investment of $1000 grows at an annual interest rate of 5%, compounded annually. What will be the balance after 3 years?

Mon, 20 Apr 2026 00:40:13 +0000

**What Your $1,000 Can Earn—And Why It Adds Up Faster Than You Think** In a climate of rising living costs and fluctuating savings, many Americans are revisiting a simple financial principle: what happens to $1,000 when invested at 5% annual interest, compounded yearly? This question isn’t just academic—it reflects growing interest in smart, steady wealth growth. Understanding how compound interest works offers clarity in a world where every dollar matters. The core calculation centers on a $1,000 principal growing at 5% annually, compounded each year. The formula for compound interest here is straightforward: Future Value = Principal × (1 + rate)^time. Applying that to your $1,000, a 5% rate compounded annually over three years produces a final balance of $1,157.63. That’s nearly a 15.7% increase—proof that even modest investments grow meaningfully over time. Why is this trending now? Economic shifts and persistent inflation have shifted public focus toward tangible ways to protect and grow savings. With interest rates trending upward in recent years, the math behind compound growth feels more relevant than ever. For users exploring long-term financial stability, this figure underscores the power of time and consistency.