Question

Juanita bought a $9000.00 savings bond that pays 4.75% annual simple interest. When she cashes in the bond, she will have to pay 16% federal income tax on the earned interest. How much money will she net if she cashes in the bond after 6 years?

Answer 1

$11154.6

Explanation:

We have that the interest would be calculated as follows:

9000 * 0.0475 = 427.5

then this for the amount of time in years:

427.5 * 6 = 2565

Now, we have to pay 16% federal interest tax. So, that would be

2565 * 0.16 = 410.4

Therefore, the money available to us after 6 years would be:

9000 + 2565 - 410.4 = 11154.6

It means that it would be $ 11154.6