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Case summary:
The Company S hired Person X. Person X accepted the job because he felt that the company had a good potential growth. At the end of the first day, Person C met Person X and introduced him to the 401(k) plan. It is a retirement plan that the companies offer to their employees.
The employee has to contribute money from his pre-tax income to the 401(k) plan. The company would also contribute a maximum of 5 percent of the salary to the plan. The plan has the following options for investments:
- 1. Investment in company stock
- 2. Investment in A“S and P” 500 index fund
- 3. Investment in A small-cap fund
- 4. Investment in A large-company stocks fund
- 5. Investment in A Bond fund
- 6. Investment in A
money market fund
Characters in the case:
- Company S: The recruiter.
- Person X: The new employee.
- Person C: The employee of Company S working in Finance section of the company.
To determine: The advantages and disadvantages of investing in mutual funds when compared with the company stock.
Introduction:
Mutual fund refers to the investment in a group or portfolio of assets.
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Chapter 10 Solutions
ESSENTIALS CORPORATE FINANCE + CNCT A.
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