Question

Dixon deposited $2000.00 in an account that paid 5% interest compounded annually. How much interest will the account earn in two years?

Answer 1

Dixon will earn $2,205.00 in two years. Every year he earns 5% of the original amount each year. Multiply 2000 by 0.05 (which is 5% in decimal form). This equals to 100. Add this to 2000 to get 2100. Multiply that number by 0.05 also to get 105. Add that to 2100 and get $2205. (Hopefully this is correct, i learned this a while ago and this is what I thought of on the top if my head).