Suppose your employer has a 401(k) plan in which they will match 100% of your
contributions up to 5% of your salary. If you make $40,000 in a given year, what
is the most that your employer will contribute that year?
A
$1,400
B
$2,400
C
$4,000
D $2,000



Answer :

To solve this problem, start by understanding what is given: 1. Your employer matches 100% of your contributions up to 5% of your salary. 2. Your annual salary is $40,000. Next, let's calculate 5% of your annual salary to find out the maximum contribution your employer is willing to match. - 5% of $40,000 is calculated by multiplying $40,000 by 0.05 (since 5% is the same as 0.05 in decimal form). \( \text{Maximum employer contribution} = $40,000 \times 0.05 \) Now, do the multiplication: \( \text{Maximum employer contribution} = $2,000 \) Therefore, the most your employer will contribute in a year for your 401(k) plan is $2,000. This matches with option D. Hence, the correct answer to the question is: D $2,000