Phil deposited $1,000 in a savings account. How much will he have in his account in two years if his account is compounded annually at a 2% interest rate?
To calculate the future value of an investment with compound interest, you can use the formula:
A = P(1 + r/n)^(nt)
Where:
A = the future value of the investment
P = the principal amount (initial deposit)
r = the annual interest rate (in decimal form)
n = the number of times that interest is compounded per year
t = the number of years
In this case, we have:
P = $1,000
r = 2% = 0.02 (2% expressed as a decimal)
n = 1 (compounded annually)
t = 2 (years)
Now we can plug these values into the formula and calculate the future value.
A = 1000(1 + 0.02/1)^(1*2)
A = 1000(1 + 0.02)^2
A = 1000(1.02)^2
A = 1000(1.0404)
A = $1,040.40
Therefore, Phil will have $1,040.40 in his account after two years.