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

A. [tex]\$6{,}250[/tex]

B. [tex]\$2{,}500[/tex]

C. [tex]\$625[/tex]

D. [tex]\$250[/tex]



Answer :

To determine the company's contribution to an employee's retirement plan based on their salary and investment rate, we need to follow these steps:

1. Calculate the Employee's Investment Amount:

The employee invests 5% of their pre-tax salary into the retirement plan. The employee's salary is [tex]$50,000. \[ \text{Employee's investment} = 50,000 \times 0.05 = 2,500 \] 2. Calculate the Company's Contribution: The company matches 25% of the employee's investment amount. To find this, we take 25% of the $[/tex]2,500 that the employee invests.

[tex]\[ \text{Company's contribution} = 2,500 \times 0.25 = 625 \][/tex]

So, the company's contribution to the retirement plan is [tex]$625. Thus, the correct answer is: C. \$[/tex]625