A bank offers an annual interest rate of 5% compounded annually. If you invest $1000, how much will it be worth after 3 years?

Fri, 17 Apr 2026 03:48:47 +0000

**Your $$ Could Grow—Here’s What 5% Annual Compound Interest Does Over Three Years** What happens when you place $1,000 in a bank account earning 5% interest, compounded annually? This question is gaining quiet traction across the U.S. as more people seek stable, transparent ways to grow savings amid ongoing economic uncertainty. With inflation pressures and rising cost of living challenges, even relatively simple financial habits are under fresh focus. This 5% annual rate offers a safe, predictable compounding path—ideal for long-term planning. **Why 5% Compounding Weekly Matters in Today’s Economy**
Countries across the U.S. are navigating complex financial landscapes marked by fluctuating inflation and shifting investment risks. For everyday investors, a 5% annual compound interest rate represents a rare balance of growth and security. It’s not a magic return—accounting for modest inflation—but a real, reliable way to build purchasing power over time. Banks offering this rate provide clarity in uncertain markets, aligning with growing public interest in straightforward wealth management tools. **How Does 5% Annual Compounding Actually Work?**
When a bank guarantees 5% annual interest compounded yearly, your $1,000 investment earns interest each year on the original amount plus accumulated gains. In year one, $1,000 grows to $1,050. In year two, interest is calculated on $1,050, adding $52.50—bringing the total to $1,102.50. By year three, interest on $1,102.50 adds $55.13, reaching $1,157.62. This compounding effect steadily increases returns year after year—proof that time and consistency yield meaningful gains, even without dramatic gains.