maths interest rate questions

Question

Taylor has 25,000 invested in a 5 year savings bond which has an annual fixed interest rate of 5% for the 5 year term. Interest earnings are reinvested into the bond at the end of each calendar year.

What is the total percentage increase in financial value of the bond over the 5 year period?

Answer 1

25000(1.05)^5

=25000(1.28)

= 31,907

about 28% increase over 5 years

more than just 5%x5=25%

25% increase would be to 31375

compounding annually made it 28%