Investing Credit and Taxes Cheat Sheet

A printable reference covering compound interest, investment returns, credit scores, loan payments, income taxes, and effective tax rates for grades 10-12.

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This cheat sheet covers the main formulas and decision rules students need for investing, credit, and taxes. It is designed as a quick reference for comparing savings growth, loan costs, credit choices, and paycheck deductions. Students need these tools to understand how money grows, how debt becomes expensive, and how taxes affect take-home pay.

Key Facts

Simple interest is I = PRT, where P is principal, R is annual interest rate as a decimal, and T is time in years.
Compound interest is A = P(1 + r/n)^(nt), where A is final amount, P is principal, r is annual rate, n is compounding periods per year, and t is years.
Investment return is ROI = (ending value - starting value + income) / starting value x 100%.
Loan payment cost can be compared using total repayment = monthly payment x number of payments.
Credit utilization is utilization = credit card balance / credit limit x 100%, and lower utilization usually helps a credit score.
Taxable income is taxable income = gross income - adjustments - deductions.
Effective tax rate is effective tax rate = total tax paid / gross income x 100%.
Net pay is net pay = gross pay - federal tax - state tax - payroll taxes - other deductions.

Vocabulary

Principal: Principal is the original amount of money invested, saved, or borrowed before interest is added.
Compound Interest: Compound interest is interest earned on both the original principal and previously earned interest.
APR: APR, or annual percentage rate, is the yearly cost of borrowing money, including interest and certain fees.
Credit Score: A credit score is a number that estimates how likely a borrower is to repay money on time.
Tax Deduction: A tax deduction lowers taxable income, which can reduce the amount of tax owed.
Effective Tax Rate: Effective tax rate is the percent of total income that is actually paid in taxes.

Common Mistakes to Avoid

Using 8 instead of 0.08 for an 8% interest rate is wrong because formulas require percent rates to be written as decimals.
Confusing simple interest with compound interest is wrong because compound interest grows faster by adding interest on past interest.
Looking only at the monthly payment is misleading because a lower payment can still cost more if the loan term is longer.
Assuming a tax deduction reduces tax dollar for dollar is wrong because a deduction lowers taxable income, not the tax bill directly.
Carrying a high credit card balance is risky because high credit utilization can lower a credit score and increase interest charges.

Practice Questions

1 You invest $800 at 6% annual interest compounded monthly for 5 years. Use A = P(1 + r/n)^(nt) to find the approximate final amount.
2 A credit card has a $2,500 limit and a$ 900 balance. Find the credit utilization percentage.
3 A worker earns $48,000 and pays$ 6,720 in total taxes. Find the effective tax rate.
4 Explain why two loans with the same monthly payment can have very different total costs.