I see choice (A) is missing, so I am giving you two solutions for you to understand and decide which one applies:
(1) Final balance with compound interest - meaning every year you add the year's interest to the principal and earn interest on the increased amount, etc. This is the actual case in real banks:
principal amount is $425 at (annual) interest rate 4.5%
interest amount for 1 year $19.13
Now, use the formula for compound interest
total balance = principal*(1+interest rate)^year
[tex]\$425\cdot(1.0475)^4= \$511.68[/tex]
So the amount after 4 years with compound interest should be $511.68
(2) the silly way: earn interest of $20.1875 every year and keep it separately (not earning additional interest). That'll make 425+4*20.1875=$505.75 which is answer (C)
so if your (A) matches my solution (1) then go with that. If not, choose (C).
