Banking and Taxes
• By: Alex Lupinski
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Welcome!!!
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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
Video Lesson Quiz
Back to welcome screen
• If you ever want to go back to the welcome
screen, click the home button
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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
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Banking
It is very important to understand how to
properly put your money into the bank
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• Did you know you can actually
make money by putting your
money into the back?
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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
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• There are two ways the bank calculates
interest:
1. Compounding on a TIME BASIS
2. Compound CONTIOUSLY
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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
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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
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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
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• 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 1344.89. So you made a
total of $344.89 by letting your money sit in the
bank for 6 years!
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Compounding Continously
• Compounding continuously means that your
money is increasing a small amount every
second
• This equation is:
FV = CV*ert
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•
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•
•
•
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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
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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
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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?
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•
•
•
So from the problem we can gather that:
FV = ?
CV = 1000
r = 5% or 0.05
t=6
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• 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
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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
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Taxes
• There are many types of taxes, but there are
two main types will we go over
• These are SALES and FEDERAL
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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.
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Sales tax
• The sales tax in Indiana is 7 percent. So that
amount is added to each item you buy
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• 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
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• 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
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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
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• The percentages are:
25% for $43,000 - $112,000
30% for $112,000 - $182,000
35% for $182,000 - $357,000
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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!
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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?
$155.75
$190.12
$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 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
$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)