Betty earns $100,000 working as a part time lawyer in New Orleans. The company provides a 1-to-1 matching contribution in the 401 (k) plan up to a maximum contribution of 4% of compensation. Her 401 (k) plan account had $50,000 in it at the beginning of the year. She contributed $15,500 to the plan this year and the employer made the matching contribution before year-end. The ending balance of the account is $87,000. What is her return on investments this year

Question

Emmett Knapp

Business

21 March, 17:07

Betty earns $100,000 working as a part time lawyer in New Orleans. The company provides a 1-to-1 matching contribution in the 401 (k) plan up to a maximum contribution of 4% of compensation. Her 401 (k) plan account had $50,000 in it at the beginning of the year. She contributed $15,500 to the plan this year and the employer made the matching contribution before year-end. The ending balance of the account is $87,000. What is her return on investments this year

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Kamari Humphrey · Answer 1

Betty's Return on investment = 56.41%

Explanation:

Maximum contribution by the company = 4% of 100,000 = 4000 USD.

Employer Contribution = 50% x 15,500.

= 7,750

Total contributed amount in USD = Betty contribution + Company's contribution

= 15,500 + 4000

= 19500 USD.

Betty 401 (k) plan account had 50,000 USD in it at the beginning means, it is the opening balance in the acount.

Opening amount = 50,000 USD

Amount Earned = 100,000 - 50,000 - 19500.

= 30500 USD.

Betty's Return on investment = (Gain - cost) / cost

= (30500 - 19,500) / (19,500)

= 56.41%