A $4,000.00 principal earns 56% interest, compounded annually. After 4 years, what is the balance in the account?
A) 500,000.00
B) 4,862.03
C) 4,600.00
D) 20,250.00
To find the balance in the account after 4 years, we can use the formula for compound interest:
A = P(1 + r/n)^(nt)
where A is the balance after t years, P is the principal (initial amount), r is the annual interest rate, n is the number of times the interest is compounded per year, and t is the number of years.
In this case, the principal (P) is $4,000.00, the annual interest rate (r) is 56% or 0.56, and the interest is compounded annually (n = 1). Plugging these values into the formula, we get:
A = 4000(1 + 0.56/1)^(1*4)
A = 4000(1.56)^4
A ≈ 4862.03
So, the balance in the account after 4 years is approximately $4,862.03.
Therefore, the correct answer is option B) 4,862.03.