A sum of 1000 earns 10 percent a year, compounded once a year. What is it worth after 2 years?

1. Compound interest is earned on the principal amount and on the interest already added. 2. In year one, 10 percent of 1000 is 100. 3. The value at the end of year one is 1000 plus 100, which is 1100. 4. That 1100 becomes the principal amount for year two. 5. In year two, 10 percent of 1100 is 110. 6. The value at the end of year two is 1100 plus 110, which is 1210. 7. Answering 1200 adds 100 in both years, which is simple interest rather than compound. 8. Answering 1221 adds a third year of growth that was never asked for. _Source: Siyavula Mathematics Grade 11 (Everything Maths, CC BY 4.0), Chapter 9: Finance, growth and decay_