document.write( "<A HREF=/cgi-bin/jump-to-question.mpl?question=1104663>Question 1104663</A>: <I><SPAN STYLE=\"word-break: break-all;\"> A bank offers two schenes of investment. Scheme A pay tax-free interest of 4%. Scheme B pays interest of 6% on which a tax of 20% has to be paid. A man has $5000 to invest.<BR>\n" );
document.write( "Calculate his earnings under the two differentschemes for 1 year </SPAN>\n" );
document.write( "</I><HR><TABLE width=100%><TR><TD><B><A HREF=http://www.algebra.com/>Algebra.Com's</A> Answer #719476 by </B><A HREF=/tutors/aboutme.mpl?userid=Theo><B>Theo(13342)</B></A><img src=\"/images/stars/stars-13.gif\" alt=\"\" >&nbsp;<A HREF=/tutors/aboutme.mpl?userid=Theo><IMG SRC=http://www.algebra.com/images/aboutme-small.gif BORDER=0 alt=\"About Me\" VALIGN=MIDDLE></A>&nbsp;<IMG SRC=http://www.algebra.com/cgi-bin/show-face.mpl?user=Theo><BR>You can <A HREF=\"/cgi-bin/embed-solution.mpl?show=1&solution=719476\">put this solution on YOUR website!</A><BR><SPAN STYLE=\"word-break: break-all;\"> 5000 * 1.04 = 5200.<BR>\n" );
document.write( "his profit is 2000 which he gets to keep because it's tax free.\r<BR>\n" );
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document.write( "5000 * 1.06 = 5300.<BR>\n" );
document.write( "his profit is 300 but he has to pay 20% tax on it.<BR>\n" );
document.write( "20% of 300 = 60.<BR>\n" );
document.write( "he is left with 240.\r<BR>\n" );
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document.write( "even though he had to pay 20%, he is still better off with the 6% investment that he has to pay 20% tax on rather than the 4% investment that he doesn't have to pay tax on.\r<BR>\n" );
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document.write( "his after tax earning on the 6% is .06 * .8 = .048.\r<BR>\n" );
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document.write( "5000 * 1.048 = 5240.<BR>\n" );
document.write( "his tax free interest is 240.\r<BR>\n" );
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document.write( "first investment at 4% gives him a tax free interest of 200.\r<BR>\n" );
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document.write( "second investment at 6% with 20% tax on the interest gives him a tax free interest of 240.\r<BR>\n" );
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document.write( "he can compare the investments directly by calculating the after tax interest rate.\r<BR>\n" );
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document.write( "after tax interest rate = before tax interest rate * (1 - tax rate on interest).\r<BR>\n" );
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document.write( ".06 - .2 * .06 = .048.\r<BR>\n" );
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document.write( " </SPAN>\n" );
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