Yes, it will support WPA2. I did not check with exact software version you have given, but tested with c1130-k9w7-mx.124-21a.JY.
Below is a very basic sample configuration that you can use. Modify SSID name/password accordingly.
If you simply connect this AP to a DHCP enable port (either home DSL modem or DHCP configured switchport) you are good to go.
Erase your configuration from existing AP in order to have a clean config (eg - erase startup and then reload)
conf t
hostname <AP_HOSTNAME>
!
dot11 ssid <SSID_NAME>
authentication open
authentication key-management wpa version 2
guest-mode
wpa-psk ascii <SSID_PASSWORD>
!
interface Dot11Radio0
encryption mode ciphers aes-ccm
ssid <SSID_NAME>
no shutdown
!
interface Dot11Radio1
encryption mode ciphers aes-ccm
ssid <SSID_NAME>
no shutdown
!
interface BVI1
ip address dhcp
!
end
write memory
HTH
Rasika
*** Pls rate all useful responses ***