Case summary:
Company S hired Person X. Person X accepted the job because he felt that the company had a good potential growth. At the end of the first day, Person C met Person X and introduced him to the 401(k) plan. It is a retirement plan that the companies offer to their employees.
The employee has to contribute money from his pre-tax income to the 401(k) plan. The company would also contribute a maximum of 5 percent of the salary to the plan. The plan has the following options for investments:
- 1. Investment in company stock
- 2. Investment in B “S and P” 500 index fund
- 3. Investment in B small-cap fund
- 4. Investment in B large-company stocks fund
- 5. Investment in B Bond fund
- 6. Investment in B
money market fund
Characters in the case:
- Company S: The recruiter
- Person X: The new employee
- Person C: The employee of Company S working in Finance section of the company
To determine: The advantages and disadvantages of choosing the B large-company stocks fund over the B “S and P” 500 index fund.
Introduction:
Mutual fund refers to the investment in a group or portfolio of assets.
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Fundamentals of Corporate Finance (Special Edition for Rutgers Business School)
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