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At 5% annual compound interest, how much is a $100 CD worth after two years?
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120
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110.25
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105
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130
That's Correct!
It's Wrong!
The correct answer is 110.25. This can be calculated by using the formula for compound interest: A = P(1 + r/n)^(nt), where A is the final amount, P is the principal amount (in this case, $100), r is the annual interest rate (5% or 0.05), n is the number of times the interest is compounded per year (assuming it is compounded annually), and t is the number of years (2). Plugging in these values, we get A = 100(1 + 0.05/1)^(1*2) = 100(1.05)^2 = 110.25.
