Question

Lonnie’s employer will match up to 5% of his salary in contributions to his 401(k). His starting salary with the company is $2,500 a month, and the company allows him to contribute up to 12% of his salary to his 401(k). What is the minimum amount of his salary that Lonnie should contribute each month to maximize his employer’s matching contribution?

A.
$12.50
B.
$30.00
C.
$125.00
D.
$175.00
E.
$300.00

Answer 1

The minimum amount of his salary that Lonnie should contribute each month to maximize his employer’s matching contribution which is $125 . Correct option C.

Explanation:

We have , Lonnie’s employer will match up to 5% of his salary in contributions to his 401(k). His starting salary with the company is $2,500 a month, and the company allows him to contribute up to 12% of his salary to his 401(k). According to the given scenario , Lonnie can contribute to matching at a maximum of 12% of his salary ($2500) :

⇒
`(salary(12))/(100)`

⇒
`(2500(12))/(100)`

⇒ $
`300` And , a minimum of 5% of his salary ($2500):

⇒
`(salary(12))/(100)`

⇒
`(2500(5))/(100)`

⇒ $
`125` .

In question we need to tell the minimum amount of his salary that Lonnie should contribute each month to maximize his employer’s matching contribution which is $125 . Correct option C.