Answered

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You have decided to invest $15,000 in a money market fund that pays you interest at the annual rate of 6% and compounds interests monthly. Your plan is to take out your money in a year and pay taxes on the interest earned. If the corresponding tax rate is 20%, how much money in total will you expect to receive in a year after paying taxes.

Sagot :

Answer:

$15,869.66

Explanation:

The formula for determining the future value of the amount invested is :

FV = PV x (1 + r / m)^mn

FV = Future value  

PV = Present value  

R = interest rate  

N = number of years

m = number of compounding

$15,000 x (1+ 0.06/12)^12 = $15,925.17

Interest earned = future value - present value

$15,925.17 - $15,000 = $925.17

Tax paid on interest earned = 0.06 x  $925.17 = $55.51

Interest after taxes = $925.17 - $55.51 = $869.66

Total amount expected = $15,000 + $869.66 = $15,869.66

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