Step 1

Since the interest is compounding, we need to calculate the interest year by year. These are the information that we have:

• P is the loan amount or principal ($2000)
• r is the compound interest rate (10%)
• The loan duration is 2 years

Step 2

After the 1^st year, we can find the interest I, by multiplying P with r. Here's how:

Step 3

Therefore, the interest after the 1^st year is $200. With this, the amount of money that we owe after the 1^st year is:

Step 4

After the 2nd year, since the interest is compounding, the interest will be 10% of $2200. Here's how we calculate for the interest:

Step 5

The interest for the end of 2^nd year is $220. Clearly, the answer is C.