(Solved Homework): I am having difficulty solving this problem with compound interest formaulas….

I am having difficulty solving this problem with compound interest formaulas.

Basciall, a guy has a balance of $5,000.00 at the beginning of a billing month. From May 3rd until May 16th he is paying 6% interest (6% monthly) and then from the 17th of May until the 1st of June the amount is reduced to 5%. He also then pays a 15% tax on those amounts. The answer should be around $300.00 – I cannot work it out!

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Expert Answer

 

Balance at beginning of month=$5,000

6% monthly interest from May 3 to May 16(14 days)

Interest for 14 days at 6% monthly interest=5000*0.06*(14/31)=$135.48

Interest rate=5% (monthly) from May17 to 1st June(16days)

Interest for 16 days at 5% monthly interest=5000*0.05*(16/31)=$129.03

Total interest=(135.48+129.03)=$264.52

Tax on interest=15%

Amount of tax=0.15*264.52=$39.68

Total amount of interest plus taxes to be paid=(264.52+39.68)= $ 304.19

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