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BUSN380 Week 2 TCO 2 Problem Set 2 - Tax Fundamentals Cash Management Distinctions among Financial I

# BUSN380 Week 2 TCO 2 Problem Set 2 - Tax Fundamentals Cash Management Distinctions among Financial I

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TCO 2 - Problem Set 2 - Tax Fundamentals; Cash Management; Distinctions among Financial Institutions 1. Thomas Franklin arrived at the following tax information: Gross salary, \$46,660 Interest earnings, \$225 Dividend income, \$80 One personal exemption, \$3,400 Itemized deductions, \$7,820 Adjustments to income, \$1,150 What amount would Thomas report as taxable income? ANS. Gross salary, \$46,660 + Dividend income, \$80 + Interest earnings, \$225 = \$46,765 – Adjustments to income, \$1150 – Itemized deductions, \$7820 – Personal exemption, \$3400 = \$34,395 2. What would be the net annual cost of the following checking account? Monthly fee, \$3.75; Processing fee, 25 cents per check;

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Unformatted text preview: Checks written, an average of 22 a month. ANS. (22 checks 12 months \$0.25) + (\$3.75 12 months) = \$111 annual cost 3. What would be the average tax rate for a person who paid taxes of \$4,864.14 on a taxable income of \$39,870? ANS. \$4,864.14 / \$39,870 x 100 = 12.2% 4. A payday loan company charges 4 percent interest for a two-week period. What would be the annual interest rate from that company? ANS. 52 / 2 = 26 periods X .04 = 1.04 x 100 = 104% 5. What is the annual opportunity cost of a checking account that requires a \$350 minimum balance to avoid service charges? Assume an interest rate of 6.5 percent. ANS. \$350 x .065 = \$22.75...
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