2.3 Savings Plans

1. Suppose you want to have $400,000 for retirement in 30 years. Your account earns 10% interest. How much would you need to deposit in the account each month?

2. You deposit $4000 each year into an account earning 3% interest compounded annually. How much will you have in the account in 30 years? Round your answer to the nearest cent.

3. You deposit $100 each month for 35 years into an account earning 3% interest compounded monthly. Round to the nearest cent as needed. a) How much total money will you put into the account? b) How much will you have in the account in 35 years) How much total interest will you earn?

4.You deposit $400 each month for 15 years into an account earning 4% interest compounded monthly. a) How much total money will you put into the account? b) How much will you have in the account in 15 years? Round your answer to the nearest cent. c) How much total interest will you earn? Round your answer to the nearest cent.

5. You deposit $480 every six months into an account earning 3.7% interest compounded semiannually for 25 years. a) How much total money will you put into the account? b) How much will you have in the account in 25 years? c) How much total interest will you earn?

6. You would like to have $600,000 when you retire in 25 years. How much should you invest each quarter if you can earn a rate of 6.3% compounded quarterly? a) How much should you deposit each quarter? Round your answer to the nearest cent. b) How much total money will you put into the account? Round your answer to the nearest cent. c) How much total interest will you earn? Round your answer to the nearest cent.

7. Suppose you want to have $600,000 for retirement in 35 years. Your account earns 8% interest. a) How much would you need to deposit in the account each month? Round your answer to the nearest cent. b) How much interest will you earn? Round your answer to the nearest cent.

8. Suppose you want to have $400,000 for retirement in 30 years. Your account earns 9% interest. Round your answers to the nearest cent. a) How much would you need to deposit in the account each month?

b) How much interest will you earn?

9 Announcers present music, news, and sports, and may provide commentary or interview guests about these or other important topics. Some act as masters of ceremonies (emcees) or disc jockeys (DJs) at weddings, parties, or clubs.

Many announcers work in radio and television studios. Some announcers are self-employed; others work part time. The median annual wage for announcers was $29,010 in May 2014.

SOURCE: United States. Department of Labor. "Announcers." Occupational Outlook Handbook. 17 Dec. 2015. Web. 8 March 2016.

A newscaster earns an annual salary of $31,700. They want to invest 10% of their monthly paycheck in order to save for retirement in 29 years. If they invest this money at 5.2% compounded monthly, how much money will they have at retirement? a) How much will be saved each year? b) What will be the monthly deposit? Round your answer to the nearest cent. c) What will be the amount in the account after 29 years? Round your answer to the nearest cent.

10. Suppose you invest $140 a month for 7 years into an account earning 8% compounded monthly. After 7 years, you leave the money, without making additional deposits, in the account for another 20 years. How much will you have in the end? Suppose instead you didn't invest anything for the first 7 years, then deposited $140 a month for 20 years into an account earning 8% compounded monthly. How much will you have in the end?

2.4 Homework - Loan Payments

1. You have $4,000 on a credit card that charges a 20% interest rate. If you want to pay off the credit card in 3 years, how much will you need to pay each month (assuming you don't charge anything new to the card)? Disclaimer: this is treating credit cards as an amortized loan, which they are not. 2. You want to buy a car. The loan amount will be $17,000. The company is offering a 5% interest rate for 48 months (4 years). What will your monthly payments be?

3. You want to buy a car. The loan amount will be $27,000. The company is offering a 4% interest rate for 60 months (5 years). What will your monthly payments be? Round to the nearest cent.

4. You have $4,000 on a credit card that charges a 22% interest rate. If you want to pay off the credit card in 4 years, how much will you need to pay each month (assuming you don't charge anything new to the card)? Disclaimer: this is treating credit cards as an amortized loan, which they are not.

5. You want to buy a $35,000 car. You can make a 10% down payment, and will finance the balance with a 5% interest rate for 48 months (4 years). What will your monthly payments be?

6. You owe $25,000 on student loans at an interest rate of 4.4% compounded monthly. You want to pay off the loan in 11 years. What will your monthly payments be? How much interest do you pay? 7. Jenelle bought a home for $450,000, paying 12% as a down payment, and financing the rest at 4.8% interest for 30 years. Round your answers to the nearest cent.

how much money did Jenelle pay as a down payment?

what was the original amount financed?

what is her monthly payment?

If Jenelle makes these payment every month for thirty years, determine the total amount of money she will spend on this home. Include the down payment in your answer

8. Roberto bought a $200,000 house, paying 14% down, and financing the rest at 6.6% interest for 30 years. His monthly payments are $1098.49. How much will he really pay for his $200,000 house?

9. You want to buy a $238,000 home. You plan to pay 15% as a down payment, and take out a 30 year loan for the rest. a) How much is the loan amount going to be? b) What will your monthly payments be if the interest rate is 6%? c) What will your monthly payments be if the interest rate is 7%?

10. You want to buy a $242,000 home. You plan to pay 10% as a down payment, and take out a 30 year loan at 5.75% interest for the rest. a) How much is the loan amount going to be? b) What will your monthly payments be? c) How much total interest do you pay? d) Suppose you want to pay off the loan in 15 years rather than 30. What will your monthly payment be? e) How much money in interest will you save if you finance for 15 years instead of 30 years?

11. Henry has a credit card that has 22% APR which is compounded monthly. The required minimum payment is 2% of the outstanding balance. Henry typically only pays the minimum payment. After his most recent payment, he had $1000 left on the card. The credit card company applies the APR to what wasn't paid and sends a the next month's bill (which is called the outstanding balance). This problem approximates what happens for credit card bills. a) How much will Henry's next credit card bill show for the outstanding balance? $ [Hint: Use the FV spreadsheet command: Divide the interest rate by 12 months (as usual), put a 1 in for nper (for 1 month), put a 0 in for PMT (he isn't paying anything more), put what remained on the card after his payment ($1000) for pv] b) How much is Henry's next minimum payment? $ [Hint: Multiply the result you have for part a by 2%.] c) Assuming that Henry only pays the minimum what is the amount that remains unpaid? $ d) The process will then repeat. Find the new outstanding balance using FV formula as described in part a using the new amount that is unpaid. $ e) When minimum payments on credit cards that have high interest rates are made, the outstanding balances from one credit card bill to the next won't show a lot of progress because of the high interest. Let's explore this for Henry. How much did Hery's debt decrease by? $ [Hint: Part a - Part d] f) What amount of money from Henry's payment in part b went to the credit card company as profit? $ (YIKES!) [Hint: Part b - Part e] If you have credit card debt, pay more than the minimum if you can. Here some information from government websites (watch out for people trying to rip you off!): (1) https://dfr.oregon.gov/financial/manage/Pages/debt-management.aspx and (2) https://consumer.ftc.gov/articles/settling-credit-card-debt. Do more research on the ideas suggested in this article: https://www.creditkarma.com/credit-cards/i/best-way-to-pay-off-multiple-credit-cards 2.5 Homework - Income Taxes

1. Courri had $156,500 of income from wages and $3,950 of taxable interest. Courri also made contributions of $2,500 to a tax-deferred retirement account. Courri has 0 dependents and files as single. What is Courri's total income? What is Courri's adjusted gross income? For Courri's filing status, the standard deduction is $12,000. What is Courri's taxable income? Use the 2018 tax table to find the income tax for Courri filing as single. Round to the nearest dollar.

2. Rajesh is filing single and he has an adjusted gross income (AGI) of $88,000 for the 2018 tax year. He qualifies for the standard deduction of $12,000. Use the following 2018 Federal tax rate schedule to calculate his 2018 Federal income tax.

If your filing status is single;

and taxable income is more than:	but not over:	your tax is:
$ 0	$9,525	10% OF the taxable income
$9,525	$38,700	$952.50 plus 12% of the excess over $9,525
$38,700	$82,500	$4,453.50 plus 22% of the excess over $38,700
$82,500	$157,500	$14,089.50 plus 24% of the excess over $82,500
$157,500	$200,000	$32,089.50 plus 32% of the excess over $157,500
$200,000	$500,000	$45,689.50 plus 35% of the excess over $200,000
$500,000	_______	$150,689.50 plus 37% OF THE AMOUNT OVER $500,000

Rajesh's 2018 tax is: $ (Round to the nearest dollar.) What is Rajesh's effective tax rate? [Tax paid divided by taxable income] % (Write as a percent, rounded to one decimal place.)

3. Jaylen and Zan are married, filing jointly. Their total adjusted gross income was $80,000 and they qualified for the standard deduction of $24,000. Use the following 2018 tax rate schedule to calculate their 2018 federal income tax.

If your filing status is married, filing jointly or surviving spouses;

and taxable income is more than:	but not over:	your tax is:
$ 0	$19,050	10% OF the taxable income
$19,050	$77,400	$1905 plus 12% of the excess over $19,050
$77,400	$165,000	$8907 plus 22% of the excess over $77,400
$165,000	$315,000	$28,179 plus 24% of the excess over $165,000
$315,000	$400,000	$64,179 plus 32% of the excess over $315,000
$400,000	$600,000	$91,379 plus 35% of the excess over $400,000
$600,000	_______	$161,379 plus 37% OF THE AMOUNT OVER $600,000

Jaylen and Zan's 2018 Federal income tax is: $ (Round to the nearest dollar.) What is Jaylen and Zan's effective tax rate? [Tax paid divided by taxable income] % (Write as a percent, rounded to one decimal place.)

4. Use the 2015 tax table to find the income tax for a taxpayer with taxable income of $24,653 filing as single. Use the 2015 tax table to find the income tax for a taxpayer with taxable income of $71,245 filing as married filing jointly.

5. Use the 2015 tax table to find the income tax for a taxpayer with taxable income of $35,157 filing as head of household. Use the 2015 tax table to find the income tax for a taxpayer with taxable income of $57,697 filing as married filing jointly.

6. Graphic designers create visual concepts using computer software or by hand to communicate ideas that inspire, inform, and captivate consumers. They develop the overall layout and production design for various applications such as for advertisements, brochures, magazines, and corporate reports.

SOURCE: United States. Department of Labor. "Graphic Designers." Occupational Outlook Handbook. 17 Dec. 2015. Web. 7 March 2016.

Employee's Rates	Matching Rates Paid bythe Employer	Self-Employed Rates
7.65% on first $118,500 of income 1.45% on income above $118,500	7.65% on first $118,500 paid in wages 1.45% on wages above $118,500	13.3% on first $118,500 of net earnings 2.9% on earnings above $118,500
1FICA taxes include Social Security and Medicare. The Social Security tax applies to the first $118,500 of income, while the Medicare tax applies to all income.

Suppose a graphic designer earns $43,000 and is not self-employed. How much will the designer have to pay in FICA taxes? $

7. Determine the amount of taxes owed or the refund that would result in this situation:

• Filing Status: Married filing jointly
• Gross Income: $125,000
• Adjustments: $6,900
• Itemized Deductions: $10,400
• Credits and Withholdings: $15,000 a. What is their adjusted gross income (AGI)? b. Should they itemize or take the standard deduction? c. Use the simplified 2018 tax tables to determine their taxable income. *Remember to subtract the deduction to determine the taxable income. d. Determine their tax using the 2018 tax table e. What is their final tax refund or amount still owed (if they owe enter the number as a negative)?
  • take the standard deduction
  • itemize