Financial Math - Fall Semester Exam - 2024 (Review)

Front

What is the formula to calculate capital gains tax?

Back

Capital gains tax can be calculated using the formula: Tax Rate x Capital Gain.

Front

If Emma purchased stock for $7,200 and sold it for $9,120, what is her capital gain?

Back

Emma's capital gain is $9,120 - $7,200 = $1,920.

Front

What is the capital gains tax rate given in the example?

Back

The capital gains tax rate is 15%.

Front

How much capital gains tax will Emma pay on her capital gain of $1,920?

Back

Emma will pay $1,920 x 0.15 = $288 in capital gains tax.

Front

What is the formula to determine how long it will take for an investment to double?

Back

The Rule of 72: Divide 72 by the annual interest rate.

Front

If Karen and Steve invested $4,500 at an interest rate of 6%, how long will it take for their investment to double?

Back

It will take approximately 12 years for their investment to double.

Front

What is the formula for calculating interest earned on a CD compounded quarterly?

Back

Interest = Principal x (1 + (rate/n))^(nt) - Principal, where n is the number of times interest is compounded per year.

Front

If Emma invested $7,500 into a 36-month CD with an annual interest rate of 3.2%, what is the quarterly interest rate?

Back

The quarterly interest rate is 3.2% / 4 = 0.8%.

Front

How much interest will Emma earn in the first quarter on her CD investment?

Back

Emma will earn $7,500 x 0.008 = $60.00 in the first quarter.

Front

What is Medicare?

Back

Medicare is a federal program that pays for certain health-care expenses for older citizens and others with disabilities.