Banking and Taxes By: Alex Lupinski Next Welcome!!! Click on the Video button to go check out the introductory video, click on the Lesson button to review the material, or if your feeling bold, click on the Quiz button to take the quiz VideoLessonQuiz Back to welcome screen If you ever want to go back to the welcome screen, click the home button PreviousHomeNext In this program you will learn: To calculate interest and compound interest To calculate and be familiar with taxes An understanding of how to save money alittle better NextPreviousHome Banking It is very important to understand how to properly put your money into the bank Next PreviousHome Did you know you can actually make money by putting your money into the back? Next Previous Home When you put your money into the bank, you receive a small amount back. This amount is called interest Interest is an amount of money you receive for depositing money in the bank NextPreviousHome There are two ways the bank calculates interest: 1.Compounding on a TIME BASIS 2.Compound CONTIOUSLY NextPreviousHome Compounding on a time basis This is done by calculating the new total every set number of months or years. The equation is: FV = CV(1+r/n) nt NextPreviousHome FV = CV(1+r/n) nt FV stands for future value CV stands for current value r stands for interest rate, which the banks tells you n stands for the number of times compounded a year t stands for the total time the money is in the bank NextPreviousHome Example 1 Here is an example of how it looks FV = ? CV = 1000 r =.05 n = 2 t = 6 Note: for the n, this would mean that we compounded the total twice in one year NextPreviousHome By recalling the equation: FV = CV(1+r/n) nt we can now plug the numbers from the last slide onto the equation so; FV = 1000(1+.05/2) 2(6) Now if we put these numbers into our calculator we get an answer of So you made a total of $ by letting your money sit in the bank for 6 years! NextPreviousHome Compounding Continously Compounding continuously means that your money is increasing a small amount every second This equation is: FV = CV*e rt NextPreviousHome FV = CV*e rt FV stands for future value CV stands for current value r stands for rate given by the bank t stands for amount of time in the bank e is a constant value NextPreviousHome What is e? e is an exponential function that is used in many mathematical functions It is sort of like the pi function that is the circumference equations for a circle Next Previous Home Example Suppose that you have $1000 dollars and are looking to deposit it into the bank. They will give you an interest of 5% for 6 years. What will the total be after 6 years of compounding continously? NextPreviousHome So from the problem we can gather that: FV = ? CV = 1000 r = 5% or 0.05 t = 6 NextPreviousHome So putting the correct values into the equation: FV = CV*e rt We get FV = 1000*e.05(6) Putting this into a calculator will get us the answer of $ So we put $1000 into the bank and received an interest of $ NextPreviousHome Comparison So for a time based interest we got and for compounding continously we got a total of $ So we made more money from compounding continously PreviousHome Next There are many types of taxes, but there are two main types will we go over These are SALES and FEDERAL Taxes Previous Home Next Sales Tax Sales tax is a tax that is added to almost anything that you buy It is on everything from a candy bar, to a car. PreviousHome Next Sales tax The sales tax in Indiana is 7 percent. So that amount is added to each item you buy PreviousHome Next So lets say we buy a Snickers candy bar for 99 cents. Since sales tax is 7 percent we would multiple 99 cents by.07 because we convert it to a number. It would look like this: $.99 x.07 =.069 Since we cannot have.069 cents, we round up to.07 and add this to $.99 giving us a total of $1.06 for the Snickers PreviousHome Next Now we want to buy a car for $23,674 dollars, but need to find out the total end cost. Remember that sales tax is 7% or x.07 = Add this back into the original amount and the total is $25, PreviousHome Next Federal Tax Federal tax is the money the government takes off from your paycheck form your job. They take off a certain percentage according to how much money you make PreviousHome Next The percentages are: 25% for $43,000 - $112,000 30% for $112,000 - $182,000 35% for $182,000 - $357,000 PreviousHomeNext You are now ready to take the quiz. Click the quiz button if you think you are ready or you can go back and review the material again QuizBack to beginning of lesson Quiz Question #1 You won $5000 in a contest and are looking to put the money in the bank. The bank teller tells you that they will give a continuously compounded rate of 7% over 8 years. How much is your total after the 8 years? (Click the answer you think is correct) $ $ $ $ Correct! Great Job! Next Question Incorrect Nice try, but check your numbers again, remember the equation is FV = CV*e rt Back To Question Quiz Question #2 You have saved $100 in your piggy bank and your mother says you should you put that money into the bank. She says the bank is having a special today where you get a rate of 11% for 6 years if you compound your money quarterly. How much money do you make after 6 years? $155.75$ $191.76$361.46 Correct!! Spectacular!! Next Question Incorrect Almost, remember that the equation is CV(1+r/n) nt and that quarterly means four times a year Back To Question Quiz Question #3 If you are looking to make more money, would you compound on a time basis or continuously? Time basedContinously Incorrect Try to think about what was mentioned in the slides about this very topic Back To Question Correct!!! Amazing!!! Next Question Quiz Question #4 How much sales tax is on an item worth $154.95? $7.77$10.85 $165.80$108.47 Correct!!!! Fantastic!!!! To Final Question Incorrect Make sure to read the question correctly. Remember sales tax is 7% Back to Question Final Question How much money would you pay to the government if you were making $183,000 for your job? $33,635$45,750 $54,900$64,050 Incorrect Remember the percentages: 25% for $43,000 - $112,000 30% for $112,000 - $182,000 35% for $182,000 - $357,000 Back To Question Correct!!!!! Incredible!!!!! To Final Slide Know go out and show everyone you know how much you have learned.(Push escape to end)