Investing $5,000 for 10 years at a 10% interest rate compounded annually would yield a future value of approximately $12,968.71.
To understand how the future value of $12,968.71 is reached, let’s break down the compound interest calculation step-by-step. you’ll also find an amortization table below to visualize the growth of the investment over the 10 years.
Compound Interest Calculation:
- Principal (P): The initial amount invested, which is $5,000.
- Annual Interest Rate (r): The yearly interest rate, which is 10% or 0.10 in decimal form.
- Number of Years (t): The total time the money is invested for, which is 10 years.
- Compound Interest Formula: The formula to calculate the future value (A) is given by: A = P(1+r)t
Year-by-Year Calculation:
Year 1:
Formula: 5000 × (1+0.10)1
Calculation: 5000 × 1.10 = 5500
Balance at the end of Year 1: $5,500
Year 2:
Formula: 5000×(1+0.10)2
Calculation: 5000×1.21 = 6050
Balance at the end of Year 2: $6,050
Year 3:
Formula: 5000×(1+0.10)3
Calculation: 5000×1.331 = 6655
Balance at the end of Year 3: $6,655
Year 4:
Formula: 5000×(1+0.10)4
Calculation: 5000×1.4641 = 7320.5
Balance at the end of Year 4: $7,320.50
Year 5:
Formula: 5000×(1+0.10)5
Calculation: 5000×1.61051 = 8052.55
Balance at the end of Year 5: $8,052.55
Year 6:
Formula: 5000×(1+0.10)6
Calculation: 5000×1.771561 = 8857.81
Balance at the end of Year 6: $8,857.81
Year 7:
Formula: 5000×(1+0.10)7
Calculation: 5000×1.9487171 = 9743.59
Balance at the end of Year 7: $9,743.59
Year 8:
Formula: 5000×(1+0.10)8
Calculation: 5000×2.14358881=10717.94
Balance at the end of Year 8: $10,717.94
Year 9:
Formula: 5000×(1+0.10)9
Calculation: 5000×2.357947691=11789.74
Balance at the end of Year 9: $11,789.74
Year 10:
Formula: 5000×(1+0.10)10
Calculation: 5000×2.59374246 = 12968.71
Balance at the end of Year 10: $12,968.71
Amortization Table for $5000 invested for 10yrs at 10% compounded annually.
Here is the amortization table showing the growth of the investment over 10 years with compound interest:
| Year | Opening Balance (USD) | Interest for the Year (USD) | Closing Balance (USD) |
|---|---|---|---|
| 1 | 5,000.00 | 500.00 | 5,500.00 |
| 2 | 5,500.00 | 550.00 | 6,050.00 |
| 3 | 6,050.00 | 605.00 | 6,655.00 |
| 4 | 6,655.00 | 665.50 | 7,320.50 |
| 5 | 7,320.50 | 732.05 | 8,052.55 |
| 6 | 8,052.55 | 805.26 | 8,857.81 |
| 7 | 8,857.81 | 885.78 | 9,743.59 |
| 8 | 9,743.59 | 974.36 | 10,717.94 |
| 9 | 10,717.94 | 1,071.79 | 11,789.74 |
| 10 | 11,789.74 | 1,178.97 | 12,968.71 |
Conclusion
Each year, the interest is calculated on the opening balance, added to it, and this sum becomes the next year’s opening balance. This process continues for 10 years, leading to the final amount of $12,968.71.
Now you know how much $5000 invested for 10 years at 10 percent compounded annually is, would you like to do other calculations yourself? If YES! Use our accurate Compound Interest Calculator to check different compounding results with different amounts.
