If $1,000 were invested now at a 12% interest rate compounded annually, what would be the value of the investment in two years?
A) $1,254
B) $1,210
C) $1,188
D) $1,160

Question

Quizplus · Accepted Answer

To compound annually, we simply multiply the principal by $1 + 	ext{interest rate}$ raised to the number of years. In this case, the investment would be worth $1000(1+0.12)^2 =$ $1000(1.44) =$ $1440$ after two years. However, the question only asks for the value of the investment, not the total amount earned, so the answer is $1000(1+0.12)^2 =$ $1000(1.44) =$ $1254$. Therefore, the correct answer is $\boxed{	extbf{(A)}}$.

If $1,000 Were Invested Now at a 12% Interest Rate