Answer: the final amount is $1262.5
Step-by-step explanation:
Initial amount in the account is $1000 This means that the principal is
P = 1000
It was compounded annually. This means that it was compounded once in a year. So
n = 1
The rate at which the principal was compounded is 6%. So
r = 6/100 = 0.06
It was compounded for 4 years. So
t = 4
The formula for compound interest is
A = P(1+r/n)^nt
A = total amount in the account at the end of t years. Therefore
A = 1000 (1 + 0.06/1)^1×4
A = 1000(1.06)^4 = $1262.5
