FIN Chapter 2

Assume the following for a 401-K plan. Annual salary = $72,000 Monthly salary = $6,000 Pay date = End of each month Amount you save in 401-K = 5% of salary Amount of employer match = 4% of salary How much will you have in the 401-K plan after 40 years assuming a 8% investment return? (Round to the nearest dollar)

$1,885,144

An employee makes $120,000 per year and saves 7% of his/her salary in the company's 401-K plan. The company matches 4% of the salary when the employee saves up to 5%. Further, the employee pays $2,000 per year in health insurance premiums for a family health insurance plan from the employer. What will be the W-2 compensation for this employee?

$109,600

A UCF graduate is offered a salary of $36,000 in the year 2017 and expects to receive 3% raises each year. What would be his/her salary in 2020? (Round to the nearest dollar, this is a future value of a single sum TVM problem)

$39,338

What is the AFTER TAX value of a $5,000 company car, assuming a 15% marginal tax rate? (Note that if your employer provides you with a car, the personal use of the car will be added to your W-2, and you will have to pay taxes, thus cars are a "Pre-tax" benefit).

$4,250.00

A UCF graduate is earning $44,000 a year in Orlando, and has an offer to move to a city where the cost of living is 18% higher. What would be the minimum salary this graduate would need to maintain the same standard of living?

$51,920

Using the salary search tool on PayScale, what is the MEDIAN salary for a financial analyst in Orlando Florida? Select the closest answer, the website MEDIANS seem to change slightly every month so the answer below may not tie exactly to the website. PS: You may also want to check out what your anticipated job will pay while you are visiting this site.

$52,000.

A UCF graduate is getting a masters degree at night. The graduate expects to receive an annual salary of $7,000 per year more as a result of getting a masters degree. The graduate plans to work for 40 years, so he/she will earn $280,000 more in their lifetime ($7,000 x 40 years). What is the present value of a stream of $7,000 payments for 40 years based on an annual interest rate of 7%? Assume the $7,000 is paid annually at the END of the year. By the way, if it costs say $25,000 today to get a masters degree, do you think a graduate degree is a smart economic move if your salary goes up by $7,000 per year? Hint: Calculate Net Present Value

$93,322, yes get the masters degree, the net present value of this decision is $68,322.

In general, experts advise that one must save _______ of your salary in order to have sufficient funds to maintain your standard of living in retirement (this % would include both your 401-K savings and the employer match and other savings).

10 - 15%

Assume you make $75,000 per year and contribute 10% to your monthly salary to your 401-K account. Your employer will match 3% of your monthly salary and contribute to your plan as well for 30 years. If you expect this account to earn a 10% return, what is the value of the 401-K plan at the end of 30 years? a. $1,836,646 b. $16,953,659 c. $1,412,805 e. $988,963

A

Barb Hotchkins is in the 28 percent tax bracket. A tax-exempt employee benefit with a value of $500 would have a tax-equivalent value of: A. $694. B. $528. C. $500. D. $360. E. $140.

A

Assume your monthly salary is $4,000. Your employer will match 5% for every 8% you contribute towards your 401-K plan. If you were to contribute 8% for 30 years, how much would you have in the plan assuming a 10% return? a. $452,098 b. $1,175,453 c. $774,987 d. $723,356

B

After-tax benefits include all of the following EXCEPT: a. Company paid parking b. On-site health facilities c. Company car d. Company portion of health care costs

C

What is the pretax value of a $3,000 parking benefit if you fall into the 35% tax bracket? a. $7,615 b. $8,571 c. $4,615 d. $5,050

C

____________________ is a benefit on which you pay no taxes. A. Networking B. Vesting C. A tax deferred benefit D. A tax exempt benefit E. An opportunity cost

D

The first step of the career planning process is to: A. evaluate the job market. B. identify potential job opportunities. C. develop a résumé and cover letter. D. plan for career growth. E. assess your interests, abilities, and goals.

E

Which of the following is TRUE?a) More and more employers are using credit reports as hiring tools. b) Federal law does NOT require applicants to be told if credit histories are being used in the hiring process. c) Federal law requires that job applicants must be told if credit histories are being used in the hiring process. d) It is against the law for employers to use credit reports as hiring tools. e) Answers a and c are true.

E

Which of the following would be a competency commonly associated with successful people? A. An ability to work well with others in a variety of settings B. A desire to do tasks better than they have to be done C. An ability to solve problems creatively in team settings D. Well developed written and oral communication skills E. All of the choices are competencies commonly associated with successful people

E

A UCF graduate has two job offers. Job 1 pays $36,500 with a $5,000 non-taxable benefit, while Job 2 pays $35,000 and has a $5,700 non-taxable benefit. What is the PRE-TAX value of each job assuming the graduate is in a 28% marginal tax bracket? (Round to the nearest dollar)

Job 1: $43,444 Job 2: $42,917

Functional résumés emphasize a person's skills and abilities in categories such as communications, research, and human relations. T/F

True

Younger employees are participating in their Employer's 401-K plan more so than in the past. T/F

True