A Pension Plan Promises to Pay $75,000 at the End

question 29

Essay

A pension plan promises to pay $75,000 at the end of each year for 25 years of the retirement period.
Required:
Compute the funds required to fund this pension plan at the start of the retirement period assuming:
a. discount rate of 5%; or
b. discount rate of 4%.

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Definitions:

Postponement

A strategy in supply chain management that delays the final production or distribution of a product until customer orders are received to reduce inventory costs.

Higher

A term generally used to indicate a greater amount, level, or degree of something.

Associated Cost

Refers to the total expenses directly linked to a specific activity, product, or service.

Expected Profit

The forecasted amount of profit calculated from potential revenues minus anticipated costs.