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
Nov 9, 2016

Assuming annual compounding:
XXX$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 $1000×1.06
after 2 years, the investment would be worth ($1000×1.06)×1.06

In general, after n years the investment would be worth:
XXX$1000×(1.06)n

For the specific case of 2 years
XXX$1000×(1.06)2=$1123.60