Question

Phillip has an investment of $200 that is expected to earn 10% annually. How much will the investment be worth at the end of the second year if the investment earns simple interest compounded annually

Answer 1

end of year 1

interest = 200 * 10 / 100 * 1

= principal * rate * time / 100

= 20

adding to the principal + interest

amount for second year : 200 + 20 = 220

now calculating interest for second year

interest = 220 * 10 /100 * 1

= 22

final amount after 2 years is

220 + 22

= $242 is the answer!