Evaluate the total expected present value of benefits, Financial Management

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Question:

Susan started her current job at age 30, with the normal retirement age at 60. The remuneration package of her employment includes the following benefits on top of her salary:

(1) $250,000 payable at the end of the year of death if she dies before age 60;

(2) $30,000 payable annually in advance from age 60 until death if she retires at age 60.

(3) The total expected present value plus the accumulated value from benefits (1) and (2) above, payable at the time of early retirement, if she retires between ages 50 and 60.

(4) A one-off payment of $10,000 at age 60 if she takes normal retirement.

Susan is now 50 years old and contemplating early retirement.

(a) Evaluate the total expected present value of benefits (1) and (2)?

(b) How much value has been accumulated from benefits (1) and (2)?

(c) Based on the above benefits (1)-(4) only, is Susan better or worse off by taking early retirement at age 50

Basis: AM92 ultimate mortality, 6% pa interest


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