If you invest $1,000 today at an interest rate of 10% per annum, compounded annually, the future value (FV) of that investment after two years can be calculated using the formula:
FV = P(1 + r)^t
Where:
- P = principal amount (initial investment) = $1,000
- r = annual interest rate (decimal) = 10% = 0.10
- t = number of years the money is invested = 2
Plugging the values into the formula:
FV = 1000(1 + 0.10)^2
FV = 1000(1.10)^2
FV = 1000(1.21)
FV = $1,210
Therefore, if you invest $1,000 today at a 10% interest rate compounded annually, the future value of your investment after two years will be $1,210.