An investment account grows at an annual compound interest rate of 5%. If the initial deposit is $1000, how much will the account be worth after 3 years?

Wed, 29 Apr 2026 21:19:01 +0000

**How Compound Interest Works: Your $1000 Investment Grows to Over $1,157 in Just 3 Years** Curious about how small investments can generate meaningful returns—without risk or complexity? A $1,000 deposit earning 5% annual compound interest offers a clear, real-world example of financial growth that’s both accessible and increasingly relevant in today’s cost-of-living landscape. Over three years, this simple calculation reveals how patience and consistent growth can amplify even a modest starting point. Understanding compound interest is key. Unlike simple interest, which calculates returns only on the principal, compound interest earns interest on both the initial amount and the interest already accumulated. This snowball effect accelerates wealth growth over time—especially in long-term savings. For a $1,000 investment at a steady 5% annual rate, the sequence unfolds as follows: Year 1: $1,000 earns $50 in interest, totaling $1,050
Year 2: Interest calculates on $1,050, adding $52.50, reaching $1,102.50
Year 3: The final year brings $55.13 in interest, pushing the balance to $1,157.63