In general if a quantity n is increased by say 7 percent, then the outcome is the sum of the original n and the increment, which is 0.07n, and this yields 1.07n. Essentially we are saying that with a 7 percent increase the original quantity is now 107 percent of the original.
In this particular question, the quantity (2.08x)(0.08) you mentioned is the increment and this needs to be added to the balance of 2.08x, which is equivalent to (2.08x)(1.08). I hope this makes sense.
Why do we multiply 1.08 as 8% rate for the second year. Shouldn’t it be 2.08x * 0.08?
In general if a quantity n is increased by say 7 percent, then the outcome is the sum of the original n and the increment, which is 0.07n, and this yields 1.07n. Essentially we are saying that with a 7 percent increase the original quantity is now 107 percent of the original.
In this particular question, the quantity (2.08x)(0.08) you mentioned is the increment and this needs to be added to the balance of 2.08x, which is equivalent to (2.08x)(1.08). I hope this makes sense.