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You deposit $1,000 and will receive 10% each year on your principal and interest. What is your 12th-year interest on interest? (Hint: It is not the total interest on interest earned over the 12 years.

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Answer: 12th-year interest on interest on an amount of $1,000 is $285.31.

Explanation: Here, principal, P=$1,000, rate, R= 10%, and time, T=12 years.

We have to compute the total interest at the end of 12 years.

we will use the formula,

Amount, A= P(1 + R/100)^T

Interest, I = A - P,

1. Interest at the end of 11 years,

I1 = 1000(1 + 10/100)^11

= 2853.12

2. Interest at the end of 12 years,

I1 = 1000(1 + 10/100)^12

= 3138.43

so, 12th-year interest on interest is,

I = I2 - I1

= 3138.43 - 2853.12

= 285.31

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