If you deposit $1,000 in a savings account with a 1% annual return over 5 years, how much will you have after taxes, assuming a 10% tax bracket?

To determine how much you will have after deposits and taxes, we first need to calculate the total amount accumulated in the savings account over the 5 years with a 1% annual return. This process involves applying the compound interest formula.

The formula for compound interest is:

[ A = P (1 + r)^n ]

Where:

• ( A ) is the amount of money accumulated after n years, including interest.

• ( P ) is the principal amount (the initial amount of money).

• ( r ) is the annual interest rate (decimal).

• ( n ) is the number of years the money is invested or borrowed.

By using the values from the question:

• ( P = 1,000 )

• ( r = 0.01 ) (1% as a decimal)

• ( n = 5 )

Substituting these values into the formula gives:

[ A = 1,000 \times (1 + 0.01)^5 ]

[ A = 1,000 \times (1.01)^5 ]

[ A = 1,000 \times 1.0510100501 \approx 1,051.01 ]

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