Certified Financial Planner (CFP) Exam 2026 – 400 Free Practice Questions to Pass the Exam

Question: 1 / 505

If Holly contributes 10% of her $80,000 salary to her 401(k) and her employer contributes an additional 5% to a profit share plan, along with a $2,500 IRA contribution, what is her savings ratio?

5%.

10%.

15%.

18%.

To determine Holly's savings ratio, we need to calculate her total savings contributions and then express that as a percentage of her total income.

Holly's total income is her salary of $80,000.

1. **401(k) Contribution**: Holly contributes 10% of her salary to her 401(k). This amounts to:

\[

0.10 \times 80,000 = 8,000

\]

2. **Employer's Profit Share Plan Contribution**: Her employer contributes an additional 5% of her salary to a profit-sharing plan. This contribution is calculated as follows:

\[

0.05 \times 80,000 = 4,000

\]

3. **IRA Contribution**: Holly adds a $2,500 contribution to her IRA.

Next, we sum these contributions to find her total savings:

\[

8,000 \text{ (401(k))} + 4,000 \text{ (profit share)} + 2,500 \text{ (IRA)} = 14,500

\]

Now, to find the savings ratio, we divide the total savings by her salary and then convert that into a percentage:

\

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