Answer:
$1,350
Explanation:
Simple interest formula
I = Prt
where:
- I = interest
- P = principal
- r = interest rate (in decimal form)
- t = time (in years)
Given:
- P = $1,000
- r = 10% = 0.1
- t = 5 years
⇒ Total interest earned = 1000 × 0.1 × 5 = $500
If you have to pay 30% income tax on the interest earned annually, then you will keep 70% of your earned interest.
⇒ 70% of $500 = 0.7 × $500 = $350
Account balance = principal + interest earned after tax
= $1,000 + $350
= $1,350