Compound growth with ^
Growth that builds on itself is a power, not a multiplication.
Task:
A savings pot of 5,000 grows 4% a year, with the growth reinvested. In B5:B9 give the balance at the end of each year listed in column A.
Interactive Spreadsheet
Hints
+5 XPno-hints bonusSolve it on your own to keep the bonus. Each hint gets one step closer to the formula.
Variations of POWER
0/3The same formula in the other shapes it takes at work.
- POWER Function / Exponentiation
Calculate powers and square roots using mathematical functions.
CoreIntermediate - Compound growth with ^
Growth that builds on itself is a power, not a multiplication.
Intermediate - POWER with a fraction: the yearly growth rate
A root is a power of 1/n — which is how you get an average annual rate.
Advanced
The data in this exercise
This is the grid you start with. Cell references in the task — B6, C2 — point at the row numbers and column letters below.
| A | B | |
|---|---|---|
| 1 | Starting balance | 5000 |
| 2 | Annual growth | 0.04 |
| 3 | ||
| 4 | Year | Balance |
| 5 | 1 | |
| 6 | 2 | |
| 7 | 3 | |
| 8 | 5 | |
| 9 | 10 |
What this exercise teachesMay contain the answer
Multiplying the growth by the years (5000 × 4% × 10) gives simple interest and misses the growth on the growth. Raising (1 + rate) to the number of years compounds it. ^ and POWER do the same thing; ^ is shorter once you know it.