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. What is the total amount of your emergency fund? How much is in the CD and savings account? How much is the total interest earned between both accounts in 60 days?
First, calculate your deductions:
- FICA: 7.65% of $4,520.00 = $345.18
- Federal tax withholding: 11.75% of $4,520.00 = $531.40
- State tax withholding: 8.5% of $4,520.00 = $384.20
Total deductions = $345.18 + $531.40 + $384.20 = $1,260.78
Realized income = Gross income - deductions = $4,520.00 - $1,260.78 = $3,259.22
Fixed expenses = 30% of $3,259.22 = $977.77
Emergency fund = Realized income - fixed expenses = $3,259.22 - $977.77 = $2,281.45
Amount saved in emergency fund = 5 months x $2,281.45 = $11,407.25
Amount placed in CD = 75% of $11,407.25 = $8,555.44
Amount placed in regular savings account = 25% of $11,407.25 = $2,851.81
Interest earned in CD = $8,555.44 x 5.25% / 365 days x 60 days = $66.20
Interest earned in regular savings account = $2,851.81 x 3.8% / 365 days x 60 days = $14.81
Total interest earned in 60 days = $66.20 + $14.81 = $81.01
Therefore, the total amount of the emergency fund is $11,407.25, with $8,555.44 in the CD and $2,851.81 in the regular savings account. The total interest earned between both accounts in 60 days is $81.01.