FInance News and Case Study- 06.09.19

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Valencia College *

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2010

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Economics

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Jan 9, 2024

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Porsche Jenkins Professor Hoyte June 9, 2019 Title: Financial News Thinking Critically Questions 1. Why should an individual not want a tax refund? Because they’re giving the government an interest free loan 2. Why is tax planning important? Tax planning is an essential part of a financial plan. Reduction your tax liability while maximizing the ability to contribute to retirement plans are crucial for success. 3. What is one reason tax refunds may be lower this year? changes in your income or tax rate, changes on your state and local income tax rates, and possibly losing different tax cuts and deductions. Multiple Choice Questions 1. The percentage of taxes that you pay on the next dollar of income is called the; a. marginal tax rate 2. The relevant tax rate used for financial decision-making is the; a. marginal tax rate b. average tax rate c. income tax rate d. none of these 3. Individuals should strive for their refund to be; b. zero

Porsche Jenkins Professor Hoyte June 9, 2019 Case Study Maria and her parents have decided on the affinity Visa card offered through her university because a portion of her interest charges funds a scholarship for those in financial need. She uses the card "wisely" spending only $150 per month, but she is now realizing that even though she has always made her minimum payment on time, the "charges never end." Her card has a rate of 14.50 percent and an $18 annual fee. She has asked for your help in making some spending adjustments now that her outstanding balance has reached $2,000. Use the "Credit Card Pay off Calculator" to answer the following questions. 1. If Maria continues charging $150 per month on her card, what would her monthly payment need to be in order to pay off her debt in 24 months? Use the Credit Card payoff Calculator. $250.00 Monthly payment 2. If Maria discontinues the use of her credit card but continues only to make a $50 monthly payment, how long will it take Maria to pay off her debt? How much will she pay in total interest charges? Use the Credit Card payoff Calculator. An average of 57 months and she’ll pay $850 in interest 3. If Maria discontinues the use of her credit card, what would her monthly payment need to be in order to pay off her credit balance in 24 months? How much would she pay in total interest charges? How much interest would she save by increasing her monthly payment? Use the Credit Card payoff Calculator. New payment amount will be $98.00, She’ll incur 352 interest, and save about $498 4. Maria realizes one of the obstacles to her paying off her balance is that she must purchase $600 worth of textbooks this fall and next fall. If she uses her card only for her books, how will these purchases affect her monthly payments if she still wants to be debt free in 24 months? (Assume that her purchases are 3 months and 15 months away.) Use the Credit Card payoff Calculator. Payoff will increase to $151.00

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