How much will an investment of $200 worth at the end of the second year if it earns 10% simple interest compounded annually?

To determine the future value of an investment earning simple interest, you can use the formula for simple interest, which is:

Future Value = Principal + (Principal × Rate × Time)

In this scenario, the principal amount is $200, the interest rate is 10% (or 0.10 when expressed as a decimal), and the time period is 2 years.

First, calculate the interest earned over the 2 years:

Interest = Principal × Rate × Time

Interest = $200 × 0.10 × 2

Interest = $200 × 0.20

Interest = $40

Next, add the interest to the principal to find the total value of the investment at the end of the second year:

Future Value = Principal + Interest

Future Value = $200 + $40

Future Value = $240

However, the choice labeled as $240 does not match the selected answer. The key point here may be related to a misunderstanding of how to apply or interpret the values in the question.

If the question involves compound interest (perceived from the wording “compounded annually”), the application would differ as you'd use a different formula. In simple interest, the interest is only calculated on the principal amount, while