Test 2 Reference Sheet

Section 3D: CPI

• Percentage Formula:
  • ___________% of _____________ is _____________
• Reference Values:
  • Reference value = absolute change
  • Compared value relative to reference value
  • Express reference value in decimal form__

Financial Formula Decision Making

Simple Interest

• Formula: Future Value (A) = (1 + r * t) * Present Value (P)
  • Money grows at a simple interest rate for t years

Compound Interest

• Interest is compounded n times per year for Y years
• Formula: A = P * (1 + r/n)^(n*Y)
  • APR is the annual percentage rate in decimal form

Future Value of an Ordinary Annuity (Savings Plan)

• Formula: A = P * ((1 + r/n)^(n*Y) - 1) / (r/n)
  • Starting balance: $0
  • Ending balance: $A
  • t is the number of years between starting and ending balance
  • Compounded n times per year
  • APR is the annual percentage rate in decimal form

Present Value of an Ordinary Annuity (Loan)

• Formula: P = A * (1 - (1 + r/n)^(-n*Y)) / (r/n)
  • Starting balance: $P
  • Ending balance: $0
  • t is the number of years between starting and ending balance
  • Compounded n times per year
  • APR is the annual percentage rate in decimal form

Lump Sum vs. Regular Payments

• Determine if payments are lump sum or regular equal payments
• Consider if each payment increases or decreases the balance
• Assess if interest is compounded
• Additional formulas include:
  • A = P * e^(r*t)
  • P = A * (1 - e^(-r*t)) / r

Taxes Flow Chart (2019 Tax Code)

Steps to Calculate Taxes

1. Gross Income: Total income for the year including wages, tips, profits, interest, dividends, etc.
2. Adjustments to Gross Income: Portions not taxed immediately, e.g., IRA contributions, tax-deferred savings.
3. Adjusted Gross Income (AGI): Gross income minus adjustments.
4. Deductions and Exemptions: Subtract from AGI before tax calculation.
5. Taxable Income: AGI minus deductions.
6. Calculate Taxes Owed: Use taxable income and tax table rates.
7. Tax Credits: Subtracted directly from taxes owed.
8. Total Income Tax Owed: Calculated tax minus credits.
9. Payments and Withholdings: Consider any pre-paid taxes or withholdings.
10. Final Tax Bill: Total tax owed minus payments and withholdings.

Current Tax Rates for 2019

• Tax Rates by Filing Status
  • Single, Married Filing Jointly, Head of Household, Married Filing Separately
  • Rates: 10%, 12%, 22%, 24%, 32%, 35%, 37%
• Standard Deductions
  • Single: $12,200
  • Married Filing Jointly: $24,400
  • Head of Household: $18,350
  • Married Filing Separately: $12,200
• Tax Credits
  • Child Tax Credit: $2,000 per child

Long-term Capital Gains Rates (2019)

• 0% for income in 10% and 12% brackets
• 15% for middle brackets
• 20% for the 37% bracket

FICA (Social Security & Medicare)