Tara deposits $1,000 in a retirement savings account at the beginning of each year. The account pays an interest rate of 5% compounded annually, and the interest is paid on the last day of the year. What is the balance in Tara’s account at the end of the fourth year?

Because each deposit is made at the beginning of the year, it earns interest for that year. By the end of year four, the four deposits have grown for 4, 3, 2, and 1 years, respectively: $1,000 × (1.05⁴ + 1.05³ + 1.05² + 1.05) = $4,525.63. The balance is $4,525.63, choice B.

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