1. What is a 5% Annual Increase?

A 5% annual increase means that a value grows by 5% each year, with each year's growth building on the previous year's total (compound growth). This is common in financial calculations like interest rates, salary increases, or investment growth.

2. How the Calculation Works

The calculator uses the compound growth formula:

Where:

• Old Value — The starting amount
• 5/100 — The 5% increase expressed as a decimal (0.05)
• Years — The number of years for the increase

Example: $100 with 5% annual increase for 3 years:
Year 1: $100 × 1.05 = $105
Year 2: $105 × 1.05 = $110.25
Year 3: $110.25 × 1.05 = $115.76

3. Practical Applications

Details: This calculation is used in finance for compound interest, economics for inflation projections, business for revenue growth estimates, and personal finance for salary increase projections.

4. Using the Calculator

Tips: Enter the starting value and number of years. The calculator will show the final value and a year-by-year breakdown of growth.

5. Frequently Asked Questions (FAQ)

Q1: Is this the same as simple interest?
A: No, simple interest would be 5% of the original amount each year. Compound growth gives you "interest on interest."

Q2: How does this compare to other growth rates?
A: 5% is moderate growth. Higher rates grow faster, lower rates grow slower. The power of compounding makes small differences significant over time.

Q3: What's the Rule of 72 for 5% growth?
A: Divide 72 by the growth rate (5) to estimate doubling time (14.4 years).

Q4: Can I change the growth rate?
A: This calculator is fixed at 5%, but the formula works for any rate by changing the 0.05 to your desired rate.

Q5: How accurate are long-term projections?
A: While mathematically correct, real-world factors often make long-term projections less reliable due to changing conditions.