Defined benefit pension plan

Reference no: EM13993601

Suppose that in a certain defined benefit pension plan

a. Employees work for 40 years earning wages that increase with inflation

b. They retire with a pension equal to 75% of their final salary. This pension also increases with inflation

c. The pension is received for 20 years

d. The pension fund's income is invested in bonds which earn the inflation rate.

Estimate the percentage of an employee's salary that must be contributed to the pension plan if it is to remain solvent. (Hint: Do all calculations in real rather than nominal dollars.)

Reference no: EM13993601

Questions Cloud

Problem regarding the physical inventory count : Goods from a supplier costing $760 are in transit with UPS on December 31, 2014. The terms are FOB shipping point (explained in the "Required" section). Because these goods had not yet arrived, they were excluded from the physical inventory count.

Huge component of successful lean implementation is teamwork : After reading Chapter 6 on Lean Systems, one obvious take away is that a huge component of successful Lean implementation is teamwork. A case could be made that Lean systems work better in some cultures than in others, depending how that culture valu..

Increase is caused by increased volume of business : When comparing the 2012 figures with the 2013 figures shown in the table, the amount budgeted for each warehouse in 2013 was greater than actual 2012 cost. How much of the increase is caused by increased volume of business (units shipped) and how muc..

What is the potential increase in labor productivity : An operation has a 15 percent scrap rate. As a result, 64 pieces per hour are produced. What is the potential increase in labor productivity that could be achieved by eliminating the scrap?

Defined benefit pension plan : Suppose that in a certain defined benefit pension plan

Identify one possible application of business intelligence : Consider an industry or company with which you have some familiarity, and identify at least one possible application of business intelligence (BI) in the company. Justify your decision by presenting the business value the BI system could deliver.

Contracted to purchase low-sulfur fuel oil : Cure Joc Oil USA, Inc. (Joc Oil), contracted to purchase low-sulfur fuel oil from an Italian oil refinery. The Italian refinery issued a certificate to Joc Oil, indicating that the sulfur content of the oil was 0.50 percent. Joc Oil entered into a sa..

Should we have rules based ethics standards : We've talked about rules-based versus principles-based accounting standards. Should we have rules-based ethics standards?

Prepare a budgeted income statement for month : Kelley and Wright, Attorneys, have the following budgeted items for the month of May: Fringe benefits $9,200 Depreciation-equipment 5,000 Utilities 2,000 Professional salaries (from budget) 20,000 Travel 2,400 Revenues (from budget) 68,000

User Account

All Pages