Question: What is the total amount after 2 years if $1000 is invested at a compound interest rate of 5% per annum?

Options:

1. $1100
2. $1025
3. $1050
4. $1102.50

Correct Answer: $1102.50

Solution:

Amount = 1000(1 + 0.05)^2 = 1000(1.1025) = $1102.50.