You put $1000 into a savings account yielding 6% annual interest; you left the money in for two years. How much interest do you get at the end of those two years?

1 Answer
Alan P.
Nov 9, 2016

Assuming annual compounding:
#color(white)("XXX")color(green)($1123.60)#

Explanation:

Each year the investment would increase by #6%#
or stated anther way, each year the investment would become #1.06# times what it had been.

With an initial investment of #$1000#
after #1# year, the investment would be worth #$1000 xx 1.06#
after #2# years, the investment would be worth #($1000xx 1.06) xx 1.06#

In general, after #n# years the investment would be worth:
#color(white)("XXX")$1000xx(1.06)^n#

For the specific case of #2# years
#color(white)("XXX")$1000xx(1.06)^2=$1123.60#

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