Question Number 2:
Before being simplified, the instructions for computing income tax in country R were to add 2 percent of one's annual income to the average (arithmetic mean) of 100 units of country R's currency and 1 percent of one's annual income. Which of the following represents the simplified formula for computing the income tax, in country R's currency, for a person in that country whose annual income is I?
- (A) 50 + I/200
(B) 50 + 3I/100
(C) 50 + I/40
(D) 100 + I/50
(E) 100 + 3I/100
The question defines the calculation of income tax as,
Income Tax = 2% of annual income + Average of 100 and 1% of annual income
If annual income = I,
Income tax = 2% of I + (100 + 1% of I)/2
= 0.02*I + (100 + 0.01*I)/2
= (100 + 0.04*I + 0.01*I)/2
= 50 + (0.05*I)/2
= 50 + (5*I/100)/2
= 50 + I/40
The correct answer is C.
Last edited by Rahul@gurome on Fri Nov 12, 2010 9:25 pm, edited 1 time in total.
Rahul Lakhani
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