SOLUTION: "Find the difference between the simple interest and the compound interest that would be earned from $1,000 invested for 2 years at 5{{{1/2}}}%." I asked this question a few day

Question 188472: "Find the difference between the simple interest and the compound interest that would be earned from $1,000 invested for 2 years at 5%."
I asked this question a few days ago, but I dont understand the answer that was given. So if anyone can explain it better that would be great.
Thank you (and sorry for having to ask it twice)
Answer given: 1,000(1+.055)^2
1,000(1.055)^2
1,000*1.113=$1,113.03 amount of the investment after 2 years.
Found 2 solutions by Mathtut, stanbon:
Answer by Mathtut(3670) (Show Source):
You can put this solution on YOUR website!
normal interest is given by FV=P+Prt or FV=P(1+rt)
:
for compounded interest the formula is FV=P if compounded once a year
:
if compounded more it would be FV=P where n is the number of compounding periods.
:
http://www.moneychimp.com/articles/finworks/fmfutval.htm here is one page that might help on compounding

Answer by stanbon(48558) (Show Source):
You can put this solution on YOUR website!
"Find the difference between the simple interest and the compound interest that would be earned from $1,000 invested for 2 years at 5%."
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Simple interest:
I = Prt = 1000*0.05*2 = $100
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Compound interest:
I = P[(1+0.05)^2 - 1)]
I = 1000[1.05^2-1]
I = $102.50
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Cheers,
Stan H.