Arithmetic Reasoning

Question:
If an employee invests 5% of his pre-tax salary into a retirement plan, the company will match 25% of that amount. How much will the company contribute to the plan if the employee earns $50,000 before taxes?



Answer :

Sure, let's solve this step-by-step.

### Step 1: Determine the Employee's Investment
First, we need to find out how much the employee invests in the retirement plan. The employee invests 5% of their pre-tax salary.

If the employee's pre-tax salary is [tex]$50,000, then: \[ \text{Employee Investment} = \text{Salary Pre-Tax} \times \text{Investment Percentage} \] Given: - Salary Pre-Tax = $[/tex]50,000
- Investment Percentage = 5% = 0.05 (as a decimal)

So,
[tex]\[ \text{Employee Investment} = 50,000 \times 0.05 = 2,500 \][/tex]

The employee invests [tex]$2,500 into the retirement plan. ### Step 2: Calculate the Company's Contribution Next, we calculate how much the company matches. The company matches 25% of the amount the employee invests. So, we need to find 25% of $[/tex]2,500:
[tex]\[ \text{Company Contribution} = \text{Employee Investment} \times \text{Company Match Percentage} \][/tex]

Given:
- Employee Investment = [tex]$2,500 - Company Match Percentage = 25% = 0.25 (as a decimal) So, \[ \text{Company Contribution} = 2,500 \times 0.25 = 625 \] The company will contribute $[/tex]625 to the retirement plan.

### Summary
The employee's pre-tax salary is [tex]$50,000, and they invest $[/tex]2,500 into the retirement plan. The company matches 25% of the employee's investment, which amounts to [tex]$625. Thus, the company will contribute $[/tex]625 to the plan.