Question

4. Kiara opened an investment account at a bank that pays 4% interest compounded annually. The table shows the activity in the account for 3 years. Year 1 2 3 Beginning Balance for Year $0.00 $1040.00 $1081.60 New Amount Deposited at Balance Beginning of Year $1000.00 $0.00 $0.00 $1000.00 $1040.00 $1081.60 Interest Interest Rate Earned 4% 4% 4% $40.00 $41.60 $43.26 Ending Balance for Year $1040.00 $1081,60 $1124.86 Which statement explains why the balance in this account has grown?​

Answer 1

The balance in this account has grown because of the interest earned on the account, which is compounded annually. Each year, the interest is calculated based on the beginning balance for the year, which includes the previous year's balance plus any new deposits made at the beginning of the year. The interest rate is then applied to this balance, and the resulting interest is added to the balance. This process is repeated each year, causing the balance to grow over time. Additionally, in this particular example, new deposits were made in the first year, which further increased the balance and contributed to its growth.