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

Fri, 17 Apr 2026 12:58:31 +0000

**Understanding How Compounded Interest Builds Wealth: What You Need to Know About a $1,000 Investment Growing at 5% Annually** Are you exploring ways to grow your savings beyond interest rates that feel outstanding? You might be wondering: *An investment grows at an annual interest rate of 5%, compounded annually. If the initial investment is $1,000, what will be the amount after 3 years?* Today, millions of Americans are actively learning how even moderate annual returns compound over time—turning small, consistent gains into meaningful wealth. This simple yet powerful concept is no longer just a financial formula—it’s a conversation about long-term stability in an unpredictable economy. ### The Moment Interest Becomes Momentum: Why This Rate Matters in 2024 The 5% annual compound interest rate isn’t random—it reflects a deliberate, transparent measure used across banks, retirement accounts, and investment platforms. Compounding means interest earns interest on both the original principal and previously accumulated interest, making time the silent driver of growth. For a $1,000 investment, this triggers a predictable, reliable increase: after year one, it becomes $1,050; year two, $1,102.50; year three, $1,157.63. What makes this rate compelling is its clarity—unlike volatile markets, this steady gain offers confidence amid economic shifts. With rising cost of living and shifting income patterns, many are turning to compound growth as a reliable strategy for building generational wealth without gambling for returns.