Adam invests 10,000 in an investment certificate (GIC) that pays 2 percent, compounded annually.
How much money will he have earned from interest after three years, rounded to the nearest dollar?

To calculate how much Adam will earn from interest after three years with a 2 percent interest rate compounded annually, you can use the formula for compound interest:

Where:

For Adam:

Plugging in these values:

The total interest earned is:

So, Adam will earn approximately in interest after three years.

Now, let’s explore why compound interest is often referred to as “interest on interest” — it’s basically the magic that makes your money grow faster the longer you leave it invested! Each year, not only do you earn interest on your original investment, but you also earn interest on the interest that has already been added to your balance.

If you’re interested in making the most of your future investments, consider exploring various types of savings accounts, investment funds, and stocks. The earlier you start and the smarter you plot out your plan, the better your financial future will look! Investing even small amounts regularly can yield impressive results over time due to the power of compounding!