We must use the formula for annual compound interest as follows:

`A=P(1+(R/100))^n`

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:

`A=1000*(1+(2/100))^55=2971.73`

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,

`A=P=(1+((r/100)/n))^(n*t)`

where t is the number of years and n is the number of time periods per year.

## We’ll help your grades soar

Start your 48-hour free trial and unlock all the summaries, Q&A, and analyses you need to get better grades now.

- 30,000+ book summaries
- 20% study tools discount
- Ad-free content
- PDF downloads
- 300,000+ answers
- 5-star customer support

Already a member? Log in here.

Are you a teacher? Sign up now