Example - Capital – Reinvesting the InterestIf you invest $5,000 at 5% pa you will receive $250.00 interest. If you reinvest $5,250 in year 2 you will receive $262.50 interest. If the interest you earn is reinvested each year, after 10 years you will have $8,144 and after 20 years you would have $13,266.The table below shows the effect of compounding of money on an initial investment of $5,000, $10,000 and $20,000. |
Starting Amount |
$5,000 |
$ 5,000 |
$ 5,000 |
$10,000 |
$10,000 |
$10,000 |
$20,000 |
$20,000 |
$ 20,000 |
Interest |
2% |
5% |
10% |
2% |
5% |
10% |
2% |
5% |
10% |
1 year |
$5,100 |
$ 5,250 |
$ 5,500 |
$10,200 |
$10,500 |
$11,000 |
$20,400 |
$21,000 |
$ 22,000 |
2 years |
$5,202 |
$ 5,513 |
$ 6,050 |
$10,404 |
$11,025 |
$12,100 |
$20,808 |
$22,050 |
$ 24,200 |
5 years |
$5,520 |
$ 6,381 |
$ 8,053 |
$11,041 |
$12,763 |
$16,105 |
$22,082 |
$25,526 |
$ 32,210 |
10 years |
$6,095 |
$ 8,144 |
$12,969 |
$12,190 |
$16,289 |
$25,937 |
$24,380 |
$32,578 |
$ 51,875 |
15 years |
$6,729 |
$10,395 |
$20,886 |
$13,459 |
$20,789 |
$41,772 |
$26,917 |
$41,579 |
$ 83,545 |
20 years |
$7,430 |
$13,266 |
$33,637 |
$14,859 |
$26,533 |
$67,275 |
$29,719 |
$53,066 |
$134,550 |