Here's the yearly breakdown of the compound interest growth for years 3 through 5:
Year 3:
- Principal Amount: $12,100 (the new future value from the end of Year 2)
- Interest Rate: 10% or 0.1
- Number of Years: 1
- Future Value Calculation:
[ A = 12100(1 + 0.1)^1 ]
[ A = 12100(1.1)^1 ]
[ A = 12100 \times 1.1 ]
[ A = 13310 ]
So, at the end of the third year, your investment will grow to $13,310.
Year 4:
- Principal Amount: $13,310 (the new future value from the end of Year 3)
- Interest Rate: 10% or 0.1
- Number of Years: 1
- Future Value Calculation:
[ A = 13310(1 + 0.1)^1 ]
[ A = 13310(1.1)^1 ]
[ A = 13310 \times 1.1 ]
[ A = 14641 ]
So, at the end of the fourth year, your investment will grow to $14,641.
Year 5:
- Principal Amount: $14,641 (the new future value from the end of Year 4)
- Interest Rate: 10% or 0.1
- Number of Years: 1
- Future Value Calculation:
[ A = 14641(1 + 0.1)^1 ]
[ A = 14641(1.1)^1 ]
[ A = 14641 \times 1.1 ]
[ A = 16095.1 ]
So, at the end of the fifth year, your investment will grow to $16,095.1.
This breakdown shows how your investment grows each year due to the compound interest effect over the 5-year period.