A $4,000.00 principal earns 5% interest, compounded annually. After 4 years, what is the balance in the account?(1 point)
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 amount of money accumulated after n years, including interest
P = principal amount (the initial amount of money)
r = annual interest rate (as a decimal)
n = number of times the interest is compounded per year
t = number of years the money is invested for
Given:
P = $4,000.00
r = 5% or 0.05
n = 1 (compounded annually)
t = 4 years
Plugging the values into the formula:
A = $4,000(1 + 0.05/1)^(1*4)
A = $4,000(1 + 0.05)^4
A = $4,000(1.05)^4
A = $4,000(1.21550625)
A = $4,862.03
The balance in the account after 4 years would be $4,862.03.