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Thread: compound interest problem

  1. #1
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    compound interest problem

    A sum of 315 is lodged into a deposit account at the start of every month for 5 years. Calculate the accumulation in the account if interest is calculated on the basis of 3.875% per annum effective. If the total interest earned is taxed at a rate of 20%, calculate the net value of the account after 5 years.


    Answer 20,848.79 and 20,459.03
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  2. #2
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    Re: compound interest problem

    Well, I'm not doing your homework on this one!
    Did you understand what I told you on your previous interest problem?

    Rule at math help sites is YOU show your work, we check it...

    I'll confirm that 20,848.79 is correct.
    However, problem needs to state WHEN and HOW the 20% tax is
    taken out of the account.
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  3. #3
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    Re: compound interest problem

    Had a go at the 20% tax scenario:
    20,459.03 is correct, but IF the tax is paid in one amount at end of 5th year;
    so all you need to do is add up the interest for the 5 years,
    or compute it: (20848.79 - 315*60)*.20 = 389.76
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