An employee earns a salary of $78,000 per year for 2 years. Each year she...
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Accounting
An employee earns a salary of $78,000 per year for 2 years. Each year she makes a contribution to her traditional 401k in the amount of 5.50% of annual salary. There is no company match. Her return on investment is 4% annually. Assume contributions are made on January 1st of each year and her tax rate is 32%. What is the total value of tax savings (including interest on tax savings) from traditional 401k contributions at the end of 2 years?
a. $1485
b. $2913
c. $2855
d. $2746
8. What is the dollar cost average price over a 6 month period given the following information:
Annual gross salary= $50,000
Month 1,2 and 3 contribution rate as a % of monthly gross salary = 3%
Month 4,5, and 6 contribution rate as a % of monthly gross salary = 4.5%
Monthly contributions are used to purchase a security at the below prices.
Security Prices:
Month Price
1 27.45
2 27.34
3 28.00
4 28.60
5 30.00
6 22.90
a. $27.38
b. $27.11
c. $10.42
d. $27.19
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