You are 21-years-old and working in the marketing department of a medium-sized corporation. You are earning an annual salary of $40,000 paid every two weeks. Your employer provides a 401 (k) plan, and matches employee contributions by 50% up to a maximum 3% of your annual salary. You are in a 25% marginal tax rate.

1)Assume that you contribute 6% of your gross income to your 401 (k) account. How much will you contribute annually and per pay period to your retirement account?

a) $ 2400 and $92

b) $ 2400 and $400

c) $ 2400 and $200

2) Given your employer's contribution matching program, a total of ______ will be deposited each pay period. This will lead to a tax savings of ______ in income taxes per year.

3) All other things being equal, what is the best type of investment income? a) Tax-sheltered income b) Tax-exempt income c) Tax-deferred income d) Taxable income