Math interest cross-examine?
Sherman deposited $3000 in an account paying 8 percent interest compounded annually. He withdraw his money and interest 3 years later. How much did he withdraw?
Answers: He withdraw 3000 * (1.08^3)
The answer depends on his tax rate. Interest is paid annually on which he will hold to pay taxes each year. And are we discussion constant dollars or inflation dollars?
If we assume he is in the 25% federal tax bracket and within the 5% state and local tax bracket and inflation is running at 4% annually--probably a little on the low side currently, more close to 8% if you have to pay your own robustness insurance and food for a family of 4.--then we can perhaps total an answer.
year 1 $240 less taxes = $168 but inflation at 4% took $120 of the $3000 so at the end of year 1 Sherman net $48.
year 2 $3048 at 8% gives $243.84 less taxes = $170.69 but inflation took $121.92 so Sherman net $48.77.
year 3 $3096.77 at 8% gives $247.74 less taxes = $173.42 but inflation took $123.87 so Sherman net $49.55
So at the end of 3 years Sherman had a valid amount of about
$3146.32 giving an effect interest rate of 1.56%. Sweet. No wonder everyone in the U S is a borrower to some extent than a saver.
I think the dummy above me can't differentiate between material life and a 7th grade math problem. The answer to your interrogate is 3779.14. The easiest way to do these types of problems is on a financial calculator or using the FV function in excel. You can do them by mitt as well but they can get to be a throbbing in the rear doing them that style. 3000 * 1.08 *1.08 *1.08
= 3779.14
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Answers: He withdraw 3000 * (1.08^3)
The answer depends on his tax rate. Interest is paid annually on which he will hold to pay taxes each year. And are we discussion constant dollars or inflation dollars?
If we assume he is in the 25% federal tax bracket and within the 5% state and local tax bracket and inflation is running at 4% annually--probably a little on the low side currently, more close to 8% if you have to pay your own robustness insurance and food for a family of 4.--then we can perhaps total an answer.
year 1 $240 less taxes = $168 but inflation at 4% took $120 of the $3000 so at the end of year 1 Sherman net $48.
year 2 $3048 at 8% gives $243.84 less taxes = $170.69 but inflation took $121.92 so Sherman net $48.77.
year 3 $3096.77 at 8% gives $247.74 less taxes = $173.42 but inflation took $123.87 so Sherman net $49.55
So at the end of 3 years Sherman had a valid amount of about
$3146.32 giving an effect interest rate of 1.56%. Sweet. No wonder everyone in the U S is a borrower to some extent than a saver.
I think the dummy above me can't differentiate between material life and a 7th grade math problem. The answer to your interrogate is 3779.14. The easiest way to do these types of problems is on a financial calculator or using the FV function in excel. You can do them by mitt as well but they can get to be a throbbing in the rear doing them that style. 3000 * 1.08 *1.08 *1.08
= 3779.14