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 B “S and P” 500 index fund 3. Investment in B small-cap fund 4. Investment in B large-company stocks fund 5. Investment in B Bond fund 6. Investment in B 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 effective annual percentage rate. Introduction: Effective annual percentage rate refers to the annual percentage yield from the investment in a given year.

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Chapter 12, Problem 2M

Summary Introduction

Case summary:

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 B “S and P” 500 index fund

3. Investment in B small-cap fund

4. Investment in B large-company stocks fund

5. Investment in B Bond fund

6. Investment in B 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 effective annual percentage rate.

Introduction:

Effective annual percentage rate refers to the annual percentage yield from the investment in a given year.

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