Question

2. Kay is trying to decide between two job offers. The compensation package for job A includes 80% of the cost of a $300-per-month health insurance plan, 90% of the cost of a $40-per-month life insurance plan, a salary of $65,000 per year, and a 5% match on 401(k) contributions. The compensation package for job B includes 70% of the cost of a $400-per-month health insurance plan, 80% of the cost of a $50-per-month life insurance plan, a salary of $64,000 per year, and a 10% match on 401(k) contributions. Kay plans to contribute $8000 per year to her 401(k) plan. (7 points: Part I - 2 points; Part II - 2 points; Part III - 2 points; Part IV - 1 point)Part I: What is the yearly value of the health insurance benefit from job A? How about the yearly value of the health insurance benefit from job B?Part II: What is the yearly value of the life insurance benefit from job A? How about the yearly value of the life insurance benefit from job B?Part III: What is the yearly value of the 401(k) match from job A? How about the yearly value of the 401(k) match from job B?Part IV: For which job is the total value of the compensation package higher? Organize the answers in the table below.

Answer 1

Part 1. In order to find how much is the yearly cost for health insurance on each job, we need to determine the percentage that each job is planning to contribute, then multiply the result by 12.

For job A:

`\begin{gathered} \text{ monthly health}=300\cdot80\text{ \%} \\ \text{ monthly health}=300\cdot0.8=240 \\ \text{ yearly health}=240\cdot12=2880 \end{gathered}`

The yearly health insurance contribution for job A is $2880.

For job B:

`\begin{gathered} \text{monthly health}=400\cdot70\text{ \%} \\ \text{monthly health}=400\cdot0.7=280 \\ \text{yearly healty}=280\cdot12=3360 \end{gathered}`

The yearly health insurance contribution for job B is $3360.

Part 2.

For the life insurance we need to repeat the same process as we did with the health insurance.

For job A:

`\begin{gathered} \text{monthly life}=40\cdot90\text{ \%}=40\cdot0.9 \\ \text{monthly life}=36 \\ \text{yearly life}=36\cdot12=432 \end{gathered}`

The yearly life insurance contribution for job A is $432

For job B:

`\begin{gathered} \text{monthly life}=50\cdot0.8=40 \\ \text{yearly life}=40\cdot12=480 \end{gathered}`

The yearly life insurance contribution for job B is $480

Part 3:

We know that Kay is planning to contribute $8000 per year to her 401(k), therefore we need to calculate the percentage each company will match from that.

For job A:

`\text{ contribution 401k}=8000\cdot0.05=400`

The job A will contribute $400 yearly for her 401(k).

For job B:

`\text{ contribution 401k}=8000\cdot0.1=800`

The job B will contribute $800 yearly for her 401(k)

For part 4 we need to calculate the total compensation package, for that, we will add all the values above for each company, and the salary:

`\text{Job A}=65000+2880+432+400=68712`
`\text{Job B}=64000+3360+480+800=68640`

The job A total package is $68712, while the job B total package is $68640. Job A is higher.