Question

Assuming you could contribute up to 5 percent of your gross pay of 30,000 into a 401(k) and your employer would match your contribution up to 1 percent of your salary, what total amount would be contributed to your account each year?

A) 1,500
B) 1,800
C) 2,100
D) 2,400

Answer 1

The total amount contributed to the 401(k) account each year would be $1,800, which includes the individual's contribution of $1,500 and the employer's match of $300.

Step-by-step explanation:

If you contribute up to 5 percent of your gross pay into a 401(k), and your employer matches 1 percent, we can calculate the total annual contribution as follows:

Your annual contribution: 5% of $30,000 = 0.05 × $30,000 = $1,500

Employer's annual match: 1% of $30,000 = 0.01 × $30,000 = $300

Total annual contribution to your 401(k): $1,500 (your contribution) + $300 (employer match) = $1,800

Therefore, the correct answer is B) $1,800.