An investment grows at an annual rate of 5%, compounded annually. If the initial investment is $1000, what will be its value after 3 years?

Sat, 18 Apr 2026 08:39:37 +0000

**How An Investment Grows at 5%, Compounded Annually—And Why It Matters in Today’s US Economy** Ever wondered how a $1,000 investment can grow steadily over time, especially when earning about 5% annually, compounded each year? This question is gaining attention as more Americans explore ways to build wealth with steady returns. An investment growing at 5% compounded annually isn’t just a math formula—it reflects real-world financial planning, especially in a climate where steady growth feels both meaningful and achievable. Recent years have brought increased awareness about long-term financial habits, fueled by rising interest rates, shifting market dynamics, and growing interest in personal finance education. Especially in a post-pandemic economy, many seek reliable ways to preserve and increase purchasing power. Understanding compound growth provides clarity—showing how small, consistent investments can accumulate significantly over time. When you start with $1,000 and earn 5% annually, compounded each year, the result is a clear trajectory: after one year, it grows to $1,050—false interest making 5%. But after three years, compounding transforms this into $1,157.63. That upward spiral illustrates how consistent returns multiply, turning modest sums into meaningful capital. This steady rhythm appeals to those planning for retirement, saving for education, or building financial security in uncertain times.