Determine the replacement rate (as a percentage of final salary) for an employee who is enrolled in a defined contribution plan in which the employer annually contributes 10 percent of salary and the before tax rate of return each year equals 8 percent under each of the scenarios listed below. 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.

(a) five years of service; constant salary= $75,000

(b)five years of service; salary in years 1-3 equals $50,000; salary in years 4-5 equals $100,000