Question

You are starting a savings account for college. You put $1,000 in as your starting balance. You earn simple interest at 10% every year. You also must pay 30% income tax on the interest earned annually. Calculate the interest, balance, tax paid, and the overall balance of the account after taxes.

Answer 1

$1070

Explanation:

let us begin by calculating the interest earned

1. interest = (10/100)*1000= $100

2. 30% income tax on the interest= 30/100*100= -$30(this money will be deducted)

3 the overall balance is given as

Balance= savings + interest -30% income tax on the interest

Balance= 1000+100-30

Balance= 1100-30

Balance= $1070

therefore the account balance after taxes is $1070