Stock Market Returns: Percentage Solving Example

You invest $5,000 in a stock that has an annual return rate of 8%. If your returns are reinvested and also earn 5% annually, what will be the total value of your investment after 5 years?

Solution:

• Year 1: $5,000 + 8% of $5,000 = $5,000 + $400 = $5,400.
• Year 2: $5,400 + 8% of $5,400 = $5,400 + $432 = $5,832.
• Year 3: $5,832 + 8% of $5,832 = $5,832 + $466.56 ≈ $6,298.56.
• Year 4: $6,298.56 + 8% of $6,298.56 ≈ $6,791.70.
• Year 5: $6,791.70 + 8% of $6,791.70 ≈ $7,342.28.

After 5 years, the total value of your investment will be approximately $7,342.28.