Math of Finance: Chapter 2 Test
When we left James, he had decided to take a job at Jimmy John's as a sandwich artist with an expected salary of
$31,200 per year. James is really looking forward to the pay increase to help take care of his wife and two kids
After working four weeks, he gets his first check. It is much less than he expected. It turns out he will only get paid
for two weeks because Jimmy John's has a delayed paying process. Everyone gets paid two weeks after they work to
give Human Resources time to prepare the tax information. Since James gets paid every two weeks, a)what is his
gross income for his checks? His pay was much less. It tums out, other people get his money first. He had to pay
Federal Income Tax. b)Use the chart on the back of the test to determine his FIT. He also has to pay State
Income Tax. Oklahoma has a flat 5% tax. c)What is his SIT at 5% of his paycheck? Also, something called FICA
was on his paystub. His employer told him it was a required 6.2% tax for Social Security Retirement and a 1.45%
tax for Medicare when he gets older. d)Find James' Social Security Tax. e)Find his Medicare Tax. What is the
amount of FICA Tax listed as being withheld(add together)? Next came the big schock. Apparently, the
Republican Party still hasn't ended required healthcare. Because of this, James has to pay for group insurance with
Jimmy John's. It is $100 every paycheck, g)what percent of James' gross income is this each month? Finally,
James looks at the other category. It has two deductions listed. First, it has Sandwich Union Body Dues. Annual
dues are $130. h)How much was taken out for SUB dues just this paycheck? The second charged deduction for
other was IRA Retirement. He remembers signing up because Jimmy Johns' offers a matching 5%. If James' is
maximizing the match, i)how much is being taken out for retirement from his paycheck? After going over all the
numbers with his boss, it looks like James' check is correct. j)How much was his net income? If these numbers
remain consistent through the year, k)how much will James bring home for the year? DWhat percent of his
expected salary is this? James was really looking forward to his big paycheck. He thought he would have enough
money to get a loan on a new car. m)Do you think he should try to get the loan or not? n>Explain your opinion.