Question

Can you help? I have been stuck on this because I don't get it may you please help me? Here it is:

Answer 1

The starting balance is $1,000

The simple interest rate is 10% per year.

There is also a 30% income tax on the interest earned annually.

Year 1:

`\begin{gathered} 10\%\: interest=(10)/(100)*\$1,000=\$100 \\ Overall\: balance=\$1,000+\$100=\$1,100 \\ 30\%\: tax=(30)/(100)*\$100=\$30 \\ Overall\: balance\: after\: taxes=\$1,100-\$30=\$1,070 \end{gathered}`

Year 2:

`\begin{gathered} 10\%\: interest=(10)/(100)*\$1,000=\$100 \\ Overall\: balance=\$1,070+\$100=\$1,170 \\ 30\%\: tax=(30)/(100)*\$100=\$30 \\ Overall\: balance\: after\: taxes=\$1,170-\$30=\$1,140 \end{gathered}`

Year 3:

`\begin{gathered} 10\%\: interest=(10)/(100)*\$1,000=\$100 \\ Overall\: balance=\$1,140+\$100=\$1,240 \\ 30\%\: tax=(30)/(100)*\$100=\$30 \\ Overall\: balance\: after\: taxes=\$1,240-\$30=\$1,210 \end{gathered}`

Year 4:

`\begin{gathered} 10\%\: interest=(10)/(100)*\$1,000=\$100 \\ Overall\: balance=\$1,210+\$100=\$1,310 \\ 30\%\: tax=(30)/(100)*\$100=\$30 \\ Overall\: balance\: after\: taxes=\$1,310-\$30=\$1,280 \end{gathered}`

Year 5:

`\begin{gathered} 10\%\: interest=(10)/(100)*\$1,000=\$100 \\ Overall\: balance=\$1,280+\$100=\$1,380 \\ 30\%\: tax=(30)/(100)*\$100=\$30 \\ Overall\: balance\: after\: taxes=\$1,380-\$30=\$1,350 \end{gathered}`

Therefore, the overall balance for 5 years after taxes would be $1350