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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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  1. 20 November, 09:47
    0
    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
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