11. John's employer offers a qualified 401(k) plan and will match John's contributions up to a limit of 3% of his salary. John's salary is $20,000 and he contributes 5% the first year. Assuming that all contributions are made at the end of the year, the plan earns a 15% pre-tax return, and that John is in the 28% tax bracket. What is John's realized rate of return. a. 130% b. 65.6% c. 15% d. 10.8% e. None of the above 12. All of the following are potential disadvantages to an employee of a defined contribution pension plan EXCEPT: a. The contribution rate by the employer is uncertain. b. The retirement benefit can only be estimated in advance of retirement. c. The benefit formula may produce an inadequate benefit if an employee enters the plan at an older age. d. Greater weight from compound interest is given to the employee's low earnings at the younger ages. Use the following information for questions 13-14. Suppose that Thomas is an employee of Lee Corp. who is enrolled in a defined contribution plan in which the Lee annually contributes 10 percent of salary and the before-tax rate of return each year equals 8 percent. Assume that the cost of a $100 life annuity at retirement equals $900. That is, by giving an insurance company $900 at retirement, the insurer will give the retiree $100 every year until he or she dies. 13. What is Thomas's replacement rate (as a percentage of final salary) if he had five years of service and constant salary =$75,000. a. 6.5% b. 7% c. 13% d. 50% e. None of the above 14. What is Thomas's replacement rate (as a percentage of final salary) if he had five years of service where salary in years 1-3 equals $50,000; salary in years 4-5 equals $100,000 a. 4.4% b. 4.8% c. 14% d. 50% e. None of the above