Compound Interest: Percentage Calcualting Steps

Example: You invest $1,000 in a savings account with a 5% annual interest rate compounded annually. How much will you have after 3 years?

Solution:

• Year 1: $1,000 + 5% of $1,000 = $1,000 + $50 = $1,050.
• Year 2: $1,050 + 5% of $1,050 = $1,050 + $52.50 = $1,102.50.
• Year 3: $1,102.50 + 5% of $1,102.50 = $1,102.50 + $55.13 ≈ $1,157.63.

After 3 years, you will have approximately $1,157.63.