Question

1. You deposit $1,000 in a saving account at 10% compounded annually. How much is your first year interest? How much is your second year interest?

1. 100, 100
2. 100, 110
3. 100, 120
4. 100, 150

Answer 1

Ans B. 100, 110

FV =	Future Value
PV =	Present Value
r =	rate of interest
n=	no of period
Value after 1 year
FV =	PV (1 + r )^n
FV =	1000 * (1 + 10%)^1
FV =	1100
Interest After 1 year =	FV - PV
	1100 - 1000
	100
Value after 2nd year
FV =	PV (1 + r )^n
FV =	1000 * (1 + 10%)^2
FV =	1210
Interest in 2nd year =	FV OF 2ND YEAR - FV OF 1ST YEAR
	1210 - 1100
	110