A Pension Plan Promises to Pay $70,000 at the End

question 8

Essay

A pension plan promises to pay $70,000 at the end of each year for 10 years of the retirement period.
Requirements:
Compute the funds required to fund this pension plan at the start of the retirement period assuming:
a.discount rate of 12%; or
b.discount rate of 9%.

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Definitions:

Shareholders

Individuals or entities that own one or more shares of stock in a corporation, thus having partial ownership and interest in the company.

Shares

Units of ownership interest in a corporation or financial asset, which provide for an equal distribution in any profits, if any are declared, in the form of dividends.

Patent Rights

Legal rights granted to an inventor or assignee to exclusively exploit an invention for a certain period of time.

Goodwill

An intangible asset that arises when a business is purchased for more than the fair value of its net assets.