$2,100 principal earning 4%, compounded annually, after 4 years
To calculate the future value of the principal, we will 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)
r = the annual interest rate (decimal)
n = the number of times that interest is compounded per year
t = the time the money is invested/borrowed for, in years
Given:
P = $2,100
r = 4% or 0.04
n = 1 (compounded annually)
t = 4 years
A = $2,100(1 + 0.04/1)^(1*4)
A = $2,100(1 + 0.04)^4
A = $2,100(1.04)^4
A = $2,100(1.16985856)
A = $2,455.70
After 4 years, the principal investment of $2,100 at an annual interest rate of 4%, compounded annually, will grow to $2,455.70.