A JOB AT EAST COAST YACHTS, PART 1 You rocently graduated from colloge, and your job search lod you to East Coast Yachts. Bocause you felt the companys business was seaworthy you accepfed a job oflar The first day on the job, while you are finishing your employment paperwork, Dan Ervin, who works in finance, stops by to inform you about the company's 40t(k) plan. A 401(k) plan is a retirement plan offered by many companies. Such plans are tax-deferred savings vehicles, meaning that any deporits you make into the plan are deducled fiom your current pretax income, so no current taxes are paid on the money. For example, assume your salary will be $50,000 per year if yout contributo $4,000 to the 401(k) plan, you will only pay toxes on $47,000 in income. There are also no taxes paid on any capital gains or income while you are invested in the plan, but you do pay takes when you withdraw money at retirement. As is taily common, the company also has a 5 percent match. This means that the compary will match your contribution up to 5 percent of your salary, but you must contribute to get the match. The 40106) plan has several cptions for imvestments, most of which are mutual funds. A mutual fund is a portfolio of assots. When you purchase shares in a mutual fund, you afe actually purchasing pertial ownership of the fund's assets. The roturn of the fund is the weighted avorage of the tetum of the assots ownod by the fund, minus any oxponses. Tho largest expense is typically the management fee, paid to the fund managor. The management fee is compensation for the manager, who makes al of the investinent decialonis lor the fund East Coast Yachts uses Blodooe Financial Services as its 401(k) plan administrator. The imvestment options offered for employees are discussed below. Company Stock. One option in the 401(k) plan is stock in East Coast Yachts. The company is currontly privately held. Howewer, when you intarviewed with the owner, Lirlissa Warren, she informed you the company stock was expected to go public in the noxt three to four yoars. Until thon, a company otock price is sot each your by the board of directors. Bledsoe SaP 500 index Fund This mutual fund tracks the SBP 500. Stocks in the fund are weighted exactly the same as the SBP 500. This means the fund retum in pproximately the feturn on the SBP 500 , minus expenses. Because an index fund purchases assets based on the composition of the indexit is following. the fund marager is 16 percent of assots per year. Bledeoe 8 mall-cap Fund. This fund primarily invests in smal-capitalization stocks. As such, the returns of the fund are more volatile. The fund can also irivett to Budsoe and has outperformed the markat in tix of the last eight years. The fund oharges 1.80 percont in expenses. Btedsoe Bond Fund This fund invests in long-term corporate bonds issued by U.S.domicled companies. The fund is restricted to investimants in bonds with an mestrnent-grade cridit rating. This fund charges 1.40 percont in expensos. RedShelf eReader Investrent-grede crodit rating. This fund charges 1,40 percent in expenses. Bledsoe Money Market Fund This fund invosts in thort-lerm, high-credit-quality debt instruments, which include Treasury bills, As such, the return on the mondy markit fund is only silighty higher than the rofurn on Treasury bills. Because of the credit quality and ahort-4erm nature of the invostments, there is only a very sight riak of s nagative retum. The fund charges .60 percent in expenses. 1. What advantapes do the mutual funds offer compared to the oompany stock