Your investment would have grown to $1,485 after 5 years, simply by earning simple interest.
To illustrate the concept of simple interest and how it affects an investment over time, consider the following example:
Suppose you invest $1,000 in an account that pays a simple interest rate of 9% per year. This means that every year, you will earn $90 in interest on your investment. After one year, your account balance will be $1,090. In the second year, you will earn interest on both the initial principal of $1,000 and the interest earned in the first year, which is $90. So, in the second year, you will earn $99 in interest. After two years, your account balance will be $1,189.
To calculate the balance after any number of years, you can use the following formula:
Balance = Principal + (Interest rate × Principal × Time)
Where:
Balance is the account balance after Time years
Principal is the initial amount invested
Interest rate is the annual interest rate expressed as a decimal (e.g., 9% = 0.09)
Time is the number of years the investment has been held
Using this formula, you can calculate the balance after any number of years. For example, the balance after 5 years would be:
Balance = $1,000 + (0.09 × $1,000 × 5) = $1,485
This means that your investment would have grown to $1,485 after 5 years, simply by earning simple interest.