Your gross income is $4,520.00/month. Your deductions are FICA (7.65%), federal tax withholding (11.75%), and state tax withholding (8.5%). Your fixed expenses are 30% of your realized income. You saved 5 months' worth in an emergency fund, placing 75% in a 60-day CD at a 5.25% APR and the rest in a regular savings account at a 3.8% APR. How much is the total interest earned between both accounts in 60 days?
Total reductions each month are (.0765+11.75+.085+0.30)*4520 = 2617.08, leaving 1902.92 for savings each month
for each dollar saved, you get
0.75*0.0525 + 0.25*0.038 = 0.048875
So multiply that by 2*1902.92 to get the interest earned in two months
To calculate the total interest earned between both accounts in 60 days, we need to find the amount of money allocated to each account and then calculate the interest earned separately.
Step 1: Calculate the amount of money allocated to each account
First, calculate the amount of money spent on fixed expenses:
Fixed expenses = 30% * Gross income
Fixed expenses = 0.30 * $4,520.00 = $1,356.00
Next, calculate the amount of money saved in the emergency fund:
Emergency fund savings = 5 * Fixed expenses
Emergency fund savings = 5 * $1,356.00 = $6,780.00
Now, calculate the amount of money allocated to the 60-day CD:
Amount in 60-day CD = 75% * Emergency fund savings
Amount in 60-day CD = 0.75 * $6,780.00 = $5,085.00
Finally, calculate the amount of money allocated to the regular savings account:
Amount in regular savings account = Emergency fund savings - Amount in 60-day CD
Amount in regular savings account = $6,780.00 - $5,085.00 = $1,695.00
Step 2: Calculate the interest earned on the 60-day CD
Interest earned on the 60-day CD = Amount in 60-day CD * APR * (Days in the period / 365)
Interest earned on the 60-day CD = $5,085.00 * 0.0525 * (60 / 365) = $44.06
Step 3: Calculate the interest earned on the regular savings account
Interest earned on the regular savings account = Amount in regular savings account * APR * (Days in the period / 365)
Interest earned on the regular savings account = $1,695.00 * 0.038 * (60 / 365) = $4.00
Step 4: Calculate the total interest earned between both accounts in 60 days
Total interest earned = Interest earned on the 60-day CD + Interest earned on the regular savings account
Total interest earned = $44.06 + $4.00 = $48.06
Therefore, the total interest earned between both accounts in 60 days is $48.06.
To calculate the total interest earned in 60 days for both accounts, we first need to determine the amounts invested in each account.
Step 1: Calculate the fixed expenses:
Fixed expenses = 30% * Gross income
Fixed expenses = 0.30 * $4,520.00
Fixed expenses = $1,356.00
Step 2: Calculate the amount saved:
Amount saved = Gross income - Fixed expenses
Amount saved = $4,520.00 - $1,356.00
Amount saved = $3,164.00
Step 3: Determine the amount placed in the 60-day CD:
Amount in CD = 75% * Amount saved
Amount in CD = 0.75 * $3,164.00
Amount in CD = $2,373.00
Step 4: Determine the amount in the regular savings account:
Amount in savings account = Amount saved - Amount in CD
Amount in savings account = $3,164.00 - $2,373.00
Amount in savings account = $791.00
Now that we know the amounts in each account, we can calculate the interest earned in 60 days.
Step 5: Calculate the interest earned on 60-day CD:
Interest earned on CD = (Principal * Rate * Time) / 100
Interest earned on CD = ($2,373.00 * 5.25% * 60 days) / 365 days
Interest earned on CD = $20.60068
Step 6: Calculate the interest earned on the regular savings account:
Interest earned on savings account = (Principal * Rate * Time) / 100
Interest earned on savings account = ($791.00 * 3.8% * 60 days) / 365 days
Interest earned on savings account = $7.18811
Step 7: Calculate the total interest earned in 60 days:
Total interest earned = Interest earned on CD + Interest earned on savings account
Total interest earned = $20.60068 + $7.18811
Total interest earned = $27.78879
Therefore, the total interest earned between both accounts in 60 days amounts to approximately $27.79.