Suppose that you have an annual income of $55,000, and that you always save 22%

Question

Suppose that you have an annual income of $55,000, and that you always save 22% whenever you got paid (via an EFT that automatically buys bonds). But, you only get paid seven times a year. Once paid, you spend your cash at a constant rate over the next fifty-two days, until you get paid again.

105. How much cash do you start with at the beginning of each pay period?

a. $6,129 b. $7,885 c. $12,044 d. $21,450 e. $42,900

106. What are your average cash holdings over the course of the year?

a. $3,065 b. $3,943 c. $6,022 d. $10,725 e. $21,450

107. If a payday falls on the first of the month, and if there are thirty days in that month, how much cash will you have on the first of the next month?

a. $2,593 b. $3,335 c. $3,535 d. $4,549 e. $5,095

Explanation / Answer

105: Correct answer is a

Explanation: Annual income: 55000 $ and 22 % is EFT hence money left is : 22/100*55000= 12100:

55000-12100= 42900 $

There are seven pay periods and hence money left at the begining of each pay period is: 42900/7= $6129.

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