Objective
Work in groups to create and compare financial models to solve a problem.
Materials
- Pencils and pens
- Paper
- Graphing technology
Consider the following example scenario:
Louis is thinking about his plans for after graduation. He is looking into the jobs he can get with different degrees or programs and what the starting salaries would be so that he can earn enough to get custody of his two younger sisters. What are Louis' options?
a) In your group, come up with a similar scenario for a person looking for a job so that they can afford requirements. These might be things like buying or renting an apartment or house, buying the required tools for an apprenticeship or small business, or paying for college.
- Decide on the group's approach.
- Keep everyone focused.
- Help everyone work together.
- Make sure everyone understands.
- Push the group to explore more ideas.
- Ask questions to test solutions.
- Ask your teacher questions.
b) What information would help to solve the problem?
c) In your group, decide what degree and job you think would suit your scenario, taking note of the average starting annual salary. Explain your choice.
d) Investigate the total money earned over at least 5 years for each annual pay option:
- Option 1: average annual salary with no signing bonus and no guaranteed salary increase.
- Option 2: annual salary that earns 25\% more than the average starting annual salary for the job.
- Option 3: average annual salary with a signing bonus of \$10000.
- Option 4: initially pay \$5000 for certification in order to earn the average annual salary.
Compare and contrast the different salary options based on your chosen job using a linear model for each option, which you could represent using tables, graphs and/or equations. For example, a job that pays \$50000 per year could be modelled by y = 50000x.
e) Write a report that explains your choice of job and salary option that includes the following:
- Mathematical models and justification for the overview of options.
- A summary, with examples, of how changing the starting bonus or fees affects the model.
- A summary, with examples, of how changing the annual salary affects the model.
- A summary of other factors that could affect the annual salary and its model.
f) What other real-life factors could affect your choice of job and pay option?
g) If the person in your scenario had the following expenses:
- Had \$20000 in total debt for their college tuition.
- Paid \$21000 per year in rent/mortgage payments.
- Paid tax according to the given tax bracket:
| Tax rate |
|---|
| 15 \% on the first \$49020 of taxable income, plus |
| 20.5% on the next \$49020 of taxable income (on the portion of taxable income over \$49020 up to \$98040), plus |
| 26% on the next \$53,939 of taxable income (on the portion of taxable income over \$98,040 up to \$151,978), plus |
| 29% on the next \$64,533 of taxable income (on the portion of taxable income over \$151,978 up to \$216511), plus |
| 33% of taxable income over \$216511 |
Show how this would affect your chosen model.