Dermot has €5000 and would like to invest it for two years - Junior Cycle Mathematics - Question 5 - 2014

To calculate the tax on the interest earned:

$$ext{Tax} = ext{Interest} imes ext{Tax Rate}$$

Where:

• Interest = €200 (from part (i))
• Tax Rate = 33% = 0.33

Calculating:

$$ext{Tax} = 200 imes 0.33 = €66$$

The amount of the investment at the start of the second year can be calculated as follows:

$$ext{Investment at start of second year} = €5000 + ext{Interest} - ext{Tax}$$

By substituting the values:

$$= 5000 + 200 - 66 = €5134$$

To find the total amount at the end of the second year, we first calculate the interest earned in the second year:

$$ext{Interest for second year} = 5134 imes 0.04 = €205.36$$

Next, we find the tax on this interest:

$$ext{Tax} = 205.36 imes 0.33 = €67.77 ext{ (rounded)}$$

Finally, the total amount at the end of the second year is:

$$= 5134 + 205.36 - 67.77 = €5271.59$$

Rounding to the nearest euro gives:

$$= €5272$$