We must use the formula for annual compound interest as follows:
In this formula, P is the initial invested amount, R is the interest rate, n is the number of years, and A is the final amount.
We are given the following information: The initial deposit is $1000 (P = 1000). The interest rate is 2% (R = 2). The money is invested for a period of 55 years (n = 55).
Plugging all this into the formula above yields:
So, an initial investment of $1000, compounded annually at a rate of 2%, for a period of 55 years, would result in a final balance of $2971.73
Note that if the interest were compounded over a different time period (say monthly or half-yearly), you would have to use the following formula,
where t is the number of years and n is the number of time periods per year.