Compounding Illustrated
	n You invest $1,000 today, hold the investment for 3 years, and earn 10% each year. How much will you accumulate at the end of 3 years? n With simple interest, you earn $100 each year interest. Total will be $1,300 at the end of the 3 years. n With annual compounding, $1,331:      __________________________________________      Year   Beginning-of-        Interest        End-of-Year                Year Amount         Earned           Amount        1            $1,000                $100              $1,100        2              1,100                  110                1,210        3              1,210                  121                1,331