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 Question from Lok, a student: Dear Sir/Madam, I do not understand why 1.05 = 5%, how can I get this? In additional, if I want to calculate 10 x 5% in excel, what is the formula? Looking forward to your reply soon! Thanks & regards, Lok

Hi Lok,

5% is not 1.05, 5% is 0.05. I think I know where the confusion arises.

Suppose you buy an item for $47.76 and there is a 5% sales tax. You then have to pay$47.76 plus 5% of $47.76. This is$47.76 + 0.05 × $47.76 = (1 + 0.5 ) ×$47.76 = 1.05 × \$47.76

Thus multiplying the selling price by 1.05 gives the cost, including the 5% sales tax.

Does this help?
Penny

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