Question 3
Compound growth is a foundational idea in investing: it means you earn returns not just on your original money but also on the returns that money has already produced. Albert Einstein (often credited informally) and many educators have used compound growth to explain why starting early matters. For example, with an annual 5% return, your money grows by 5% each year and next year's 5% applies to the larger amount -- that's exponential growth over time. Practical tip: even modest, consistent rates of return can make a big difference over years. This short calculation will test your ability to apply the compound interest formula in a simple, realistic scenario. Remember to use annual compounding for this example.
If you invest $1,000 at 5% annually, compounded once per year, what is the value after 5 years (rounded to nearest cent)?
Did You Also Know...
By Wise Wallet
The Massachusetts Investors Trust (1924) is considered the origin of the modern mutual fund in the U.S.