A $6,100.00 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 future value of the investment/loan, including interest
P = the principal investment amount (initial deposit or loan amount)
r = annual interest rate (decimal)
n = number of times that interest is compounded per year
t = number of years the money is invested or borrowed for
In this case:
P = $6,100.00
r = 5% or 0.05
n = 1 (compounded annually)
t = 4 years
A = $6,100.00(1 + 0.05/1)^(1*4)
A = $6,100.00(1 + 0.05)^4
A = $6,100.00(1.05)^4
A = $6,100.00(1.21550625)
A = $7,412.88
Therefore, the balance in the account after 4 years would be $7,412.88.