A two-year investment of $200 is made today at an annual interest rate of 6%. Which of the following statements is true?

A) The interest earned in year two is $12.00 and year one is $12.72.
B) The interest earned in year one is $12.00 and year two is $12.72.
C) The FV is $224.00.
D) The future value would be greater if the interest rate were lower.

Answer: B
Explanation: B) FV = PV*(1 + r)n = $200*(1.06)1 = $212 and $212 - $200 = $12 = interest earned in year one. $212*(1.06)1 = $224.72 and $224.72 - $212 = $12.72 = interest earned in year two.