Stephen invests £7500 in an account which pays 5.5% compound interest per annum. Stephen has to pay 20% tax on the interest each year. the tax is taken from the account at the end of each year. How much money will stephen have in his account after two years? Give your answer to the nearest penny.

Question

Mathematics

Luka Waller

20 November, 07:04

Stephen invests £7500 in an account which pays 5.5% compound interest per annum. Stephen has to pay 20% tax on the interest each year. the tax is taken from the account at the end of each year. How much money will stephen have in his account after two years? Give your answer to the nearest penny.

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Answers (1)

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Sidney Knapp · Answer 1

Interest earned

7,500*0.055

=412.5

Deduct tax

412.5-412.5*0.2

=330

Add the remaining interest

330+7,500

=7,830

Calculate interest earned in the second year

7,830*0.055

=430.65

Deduct tax

430.65-430.65*0.2

=344.52

Add the remaining interest

344.52+7,830

=8,174.52 ... answer