An employee has opted to invest in his/her company's share purchase plan with following criteria:
- Shares are held in an RRSP account.
- If emplyee contributes x% of her base salary from every paycheque to purchase shares, then employer will contribute 0.5x%, (i.e 50% matching). But 0.5x <= 3, i.e employer will contribute a max of 3% of her base salary.
- The company is a big stable company, and share prices grow an average of 10% every year.
- If employee decides to convert part or whole of her shares into cash, then employer will stop paying the 0.5x% for the next 3 months.
Using this information, is it possible to determine under what conditions it is profitable to convert into cash, even considering the penalty? i.e if the share drops by a certain % or rises by a certain %?