Question 73441
The equation for compound interest is:
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{{{P = C*(1 + (r/n))^(n*t)}}}
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where the variables are defined as:
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P is the future value
C is the initial value
r is the annual interest expressed as a decimal (6% = 0.06)
n is the number of times per year the interest is compounded
t is the number of years invested.
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For this problem:
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P is unknown
C is 1000
r is 0.12
n is 1 (annually is once per year)
t is 2 years
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Substitute these numbers into the equation
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{{{P = 1000*(1 + (0.12/1))^(1*2)}}}
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Simplify:
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{{{P = 1000*(1.12)^2= 1000*1.2544 = 1254.40}}}
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The answer to this problem is that at 12% compounded annually for 2 years $1,000 will grow 
to be $1254.40.
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Hope this helps you to understand compound interest and how your money can work for you.