A $4,000.00 principal earns 5% interest, compounded annually.after 4 years,what is the balance in the account?
To calculate the balance in the account after 4 years, we can use the formula for compound interest:
A = P(1 + r/n)^(nt)
Where:
A = the balance in the account after time t
P = the principal (initial amount of money)
r = the interest rate (expressed as a decimal)
n = the number of times interest is compounded in a year
t = the number of years
In this case, the principal is $4,000.00, the interest rate is 5% (or 0.05),
the interest is compounded annually (n = 1), and the time is 4 years (t = 4).
Plugging in these values, we get:
A = 4,000(1 + 0.05/1)^(1*4)
= 4,000(1 + 0.05)^4
= 4,000(1.05)^4
= 4,000(1.21550625)
= $4,862.03
Therefore, the balance in the account after 4 years would be approximately $4,862.03.