Your company sponsors a 401(k) plan into which you deposit 10 percent of your $6

Question

Your company sponsors a 401(k) plan into which you deposit 10 percent of your $65,000 annual income. Your company matches 50 percent of the first 5 percent of your earnings. You expect the fund to yield 8 percent next year. If you are currently in the 31 percent tax bracket.

How many dollars did you invest out of your salary in your 401(k) plan this year?

What is your one-year return? (Round your answer to 2 decimal places. (e.g., 32.16))

Your company sponsors a 401(k) plan into which you deposit 10 percent of your $65,000 annual income. Your company matches 50 percent of the first 5 percent of your earnings. You expect the fund to yield 8 percent next year. If you are currently in the 31 percent tax bracket.

How many dollars did you invest out of your salary in your 401(k) plan this year?

What is your one-year return? (Round your answer to 2 decimal places. (e.g., 32.16))

Explanation / Answer

Your Annual Investment is Particulars Amount($) Employee Contribution 65,000 *0.10 6500 Tax Savings 6500*0.31 2015 Employee Cost (6500-2015) 4485 Employers match 65000*0.5*0.05 1625 Total 401(k) investment at the start of the year (6500+1625) 8125 Your One year return 1-year earnings 8125*0.10 812.5 Total 401(k) investment at year end 8125+812.5 8937.5 Employee 1-year return (8937.5-4485)/4485 99.28%

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