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##### Banking and Taxes

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**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 Lesson Video Quiz**If you ever want to go back to the welcome screen, click the**home button Previous Home Next**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 Previous Home Next**Banking**It is very important to understand how to properly put your money into the bank Next Previous Home**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 Next Previous Home**There are two ways the bank calculates interest:**• Compounding on a TIME BASIS • Compound CONTIOUSLY Next Previous Home**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 Previous Home Next**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 Previous Next Home**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 Next Previous Home**By recalling the equation: FV = CV(1+r/n)ntwe 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 1344.89. So you made a total of $344.89 by letting your money sit in the bank for 6 years! Next Previous Home**Compounding Continously**• Compounding continuously means that your money is increasing a small amount every second • This equation is: FV = CV*ert Previous Home Next**FV = CV*ert**• 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 Home Previous Next**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 Home Previous**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? Next Previous Home**So from the problem we can gather that:**• FV = ? • CV = 1000 • r = 5% or 0.05 • t = 6 Previous Home Next**So putting the correct values into the equation: FV = CV*ert**• We get FV = 1000*e.05(6) • Putting this into a calculator will get us the answer of $1349.86 • So we put $1000 into the bank and received an interest of $349.86 Previous Home Next**Comparison**• So for a time based interest we got 1344.89 and for compounding continously we got a total of $1349.86 • So we made more money from compounding continously Previous Home • Next**Taxes**• There are many types of taxes, but there are two main types will we go over • These are SALES and FEDERAL 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. Previous Home • Next**Sales tax**• The sales tax in Indiana is 7 percent. So that amount is added to each item you buy Previous Home • Next**So let’s 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 Previous Home • 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 .07 23674 x .07 = 1657.18 Add this back into the original amount and the total is $25,331.18 Previous Home • 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 Previous Home • Next**The percentages are:**25% for $43,000 - $112,000 30% for $112,000 - $182,000 35% for $182,000 - $357,000 • Next Previous Home**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 Quiz Back 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) $8753.36 $9324.79 $1352132.04 $9500.00**Correct!**Great Job! Next Question**Incorrect**• Nice try, but check your numbers again, remember the equation is FV = CV*ert 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? $190.12 $155.75 $361.46 $191.76**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 based Continously**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 $108.47 $165.80**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? $45,750 $33,635 $64,050 $54,900**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)