Advanced MathVery hardInterest earned in the second year alone
Advanced Math practice question
An account starts with $1,000 and earns 5% interest each year, compounded annually. How much interest, in dollars, is earned during the second year alone?
Answer: 52.5 or 52.50
After one year: 1,050. Second-year interest is 5% of 1,050 = 52.50.
Common wrong answers
- If you answered 50
- 50 is the first year's interest.
- If you answered 105
- 105 uses 10% of 1,050.
- If you answered 102.5
- 102.5 is the total interest over two years.
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