At the end of every month, Katie saves 20 percent of her take-home pay after taxes. If Katie is taxed at a 25 percent tax rate, and S represents Katie’s monthly salary before taxes, which of the following expressions represents Katie’s total savings at the end of six months?
Explanation
In order to find Katie’s savings after six months, it is first necessary to compute her monthly savings. Her monthly savings depend on her income and her tax rate. Begin by finding the amount of after-tax income:
After tax income =S−S(0.25)
After tax income =0.75S
Of this amount, Katie saves 20%:
0.75S∗0.20=0.15S
Multiply Katie’s monthly savings by 6 to calculate the amount of savings after six months:
0.15S∗6=0.9S
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