An account holding $1,500 earns 4 percent interest compounded annually. What is the balance after 2 years?

Correct answer to question 197 (Arithmetic Reasoning): $1,622.40

Method

Apply the growth twice, once per year. After year one the balance is 1,500 x 1.04 = $1,560, and after year two it is 1,560 x 1.04 = $1,622.40.