1.Calculate the amount of moneyyou'll have at the end of the indicated timeperiod, assuming that you earn simple interest.

You deposit $3000in an account with an annual interest of5.6% for10years.

The amount of moneyyou'll have at the end of10years is $ .

2.Use the compound interest formula to determine the accumulated balance after the stated period.

$7000 invested at an APR of 5% for 6 years.

If interest is compounded annually, what is the amount of money after 6 years?

3.Use the appropriate compound interest formula to compute the balance in the account after the stated period of time.

$15,000 is invested for 14 years with an APR of 4.5% and monthly compounding.

The amount after 14 years will be $

4.Find the annual percentage yield (APY) in the following situation.

A bank offers an APR of 4.2% compounded daily.

The annual percentage yield is nothing %.

5.Use the formula for continuous compounding to compute the balance in the account after 1, 5, and 20 years. Also, find the APY for the account.

A $16,000 deposit in an account with an APR of 3.5%.

The balance in the account after 1 year is approximately $.

(Round to the nearest cent as needed.)

The balance in the account after 5 years is approximately $.

(Round to the nearest cent as needed.)

The balance in the account after 20 years is approximately $.

(Round to the nearest cent as needed.)

The APY for the account is approximately %

(Round to two decimal places as needed.)

6.At age 24, someone sets up an IRA (individual retirement account) with an APR of 8%. At the end of each month he deposits $100 in the account. How much will the IRA contain when he retires at age 65?Compare that amount to the total deposits made over the time period.

After retirement the IRA will contain $.

(Do not round until the final answer. Then round to the nearest cent as needed.)

The total deposits made over the time period is $.

7. Use the savings plan formula to answer the following question.

Your goal is to form a college fund for your child. Suppose you find a fund that offers an APR of 6%. How much should you deposit monthly to accumulate $84,000 in 15 years?

You should invest $ each month.

(Do not round until the final answer. Then round to two decimal places as needed.)

8.Suppose you are 35 years old and would like to retire at age 60. Furthermore, you would like to have a retirement fund from which you can draw an income of $125,000 per year-forever! How much would you need to deposit each month to do this? Assume a constant APR of 5% and that the compounding and payment periods are the same.

To draw $125,000 per year, there must be $ in your savings account when you retire.

(Do not round until the final answer. Then round to the nearest integer as needed.)

You can reach your goal by making monthly deposits of $.

(Do not round until the final answer. Then round to two decimal places as needed.)

9.Consider a student loan of $20,000 at a fixed APR of 9% for 30 years.

a. Calculate the monthly payment.

b. Determine the total amount paid over the term of the loan.

c. Of the total amount paid, what percentage is paid toward the principal and what percentage is paid for interest.

a. The monthly payment is $.

(Do not round until the final answer. Then round to the nearest cent as needed.)

b. The total payment over the term of the loan is $.

(Round to the nearest cent as needed.)

c. Of the total payment over the term of the loan, % is paid toward the principal and % is paid toward interest.

(Round to the nearest tenth as needed.)

10. Consider a home mortgage of $250,000 at a fixed APR of 3% for 25 years. Complete parts (a) through (c) below.

a. Calculate the monthly payment.

The monthly payment is $.

(Do not round until the final answer. Then round to the nearest cent as needed.)

b. Determine the total amount paid over the term of the loan.

The total amount paid over the term of the loan is $.

(Round to the nearest cent as needed.)

c. Of the total amount paid, what percentage is for the principal and what percentage is for interest?

Of the total amount paid, % is for the principal and % is for interest.

(Round to one decimal place as needed.)

11. Suppose that on January 1 you have a balance of $4700 on a credit card whose APR is 13%, which you want to pay off in 2 years. Assume that you make no additional charges to the card after January 1.

a. Calculate your monthly payments.

b. When the card is paid off, how much will you have paid since January 1?

c. What percentage of your total payment (part b) is interest?

a. The monthly payment is $.

(Do not round until the final answer. Then round to the nearest cent as needed.)

b. The total paid since January 1 is $.

(Use the answer from part a to find this answer. Round to the nearest cent as needed.)

c. The percentage of the total paid that is interest is %.

(Use the answer from part b to find this answer. Round to one decimal place as needed.)

12. A man earned wages of $44,500, received $2000 in interest from a savings account, and contributed $3800 to a tax-deferred retirement plan. He was entitled to a personal exemption of $2800 and had deductions totaling $5000. Find his gross income, adjusted gross income, and taxable income.

His gross income was $. (Simplify your answer.)

His adjusted gross income was $. (Simplify your answer.)

His taxable income was $. (Simplify your answer.)

13. Decide whether a person should itemize his deductions or take the standard deduction in the following case.

A person's deductible expenditures are $8900 for interest on a home mortgage, $2500 for contributions to charity, and $658 for state income taxes. His filing status entitles him to a standard deduction of $11,800.

Choose the correct answer below.

A.

He should itemize his deductions as it would deduct more money from his taxable income.

B.

He should itemize his deductions as it would deduct less money from his taxable income.

C.

He should claim the standard deduction as it would deduct less money from his taxable income.

D.

He should claim the standard deduction as it would deduct more money from his taxable income.

Tax Rate

Single

10%

up to$9325

15%

up to$37,950

25%

up to$91,900

28%

up to$191,650

33%

up to$416,700

35%

up to$418,400

39.6%

above$418,400

Standard deduction

$6350

Exemption

(per person)

$4050

14. For the person below, calculate the FICA tax and income tax to obtain the total tax owed. Then find the overall tax rate on the gross income, including both FICA and income tax. Assume that the individual is single and takes the standard deduction.

A man earned $27,000 from wages.

Let FICA tax rates be 7.65% on the first $127,200 of income from wages, and 1.45% on any income from wages in excess of $127,200.

His FICA tax is $.

(Round up to the nearest dollar.)

His income tax is $.

(Round up to the nearest dollar.)

His total tax owed is $.

(Round up to the nearest dollar.)

His overall tax rate is %.

(Round to one decimal place as needed.)

Tax Rate

Single

Married Filing Jointly

10%

up to$9325

up to$18,650

15%

up to$37,950

up to$75,900

25%

up to$91,900

up to$153,100

28%

up to$191,650

up to$233,350

33%

up to$416,700

up to$416,700

35%

up to$418,400

up to$470,700

39.6%

above$418,400

above$470,700

Standard deduction

$6350

$12,700

Exemption

(per person)

$4050

$4050

15. Consider the following couple, who are engaged to be married. Assume that each person

takes one exemption and the standard deduction. Answer the questions below using the tax rates in the table to the right.

Katie and Michael have adjusted gross incomes of $96,500 and $82,500, respectively.

Calculate their income tax if they delay their marriage until next year so they can file their tax returns as individuals at the single tax rate this year.

Their income tax would be $.

(Round to the nearest dollar as needed.)

Calculate their income tax if they marry before the end of this year and file a joint return.

Their income tax would be $.

(Round to the nearest dollar as needed.)

Does the couple face a marriage penalty if they marry before the end of the year? (Married rates apply for the entire year, regardless of when during the year the marriage took place.) Choose the correct answer below.

A.

No, they do not, as the amount they would pay as a couple is more than the amount they would owe by filing at a single tax rate.

B.

Yes, they do, as the amount they would pay as a couple is less than the amount they would owe by filing at a single tax rate.

C.

No, they do not, as the amount they would pay as a couple is less than the amount they would owe by filing at a single tax rate.

D.

Yes, they do, as the amount they would pay as a couple is more than the amount they would owe by filing at a single tax rate.