What Is the Total Pension Expense for the Following Plan

question 35

Multiple Choice

What is the total pension expense for the following plan after 5 years? "The plan requires the company to contribute $500 for each of its 1,000 employees. The plan hopes to accumulate enough funds so that each retiree receives $20,000 in the future; the company has no obligation to guarantee the investment returns."

• A)$2,500
• B)$100,000
• C)$2,500,000
• D)$20,000,000

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Definitions:

Put Option

A put option is a financial contract giving the option holder the right, but not the obligation, to sell a specified amount of an underlying asset at a specified price within a specified time.

Right to Buy

An option that gives the holder the right, but not the obligation, to purchase a specific asset at a set price within a certain timeframe.

Standard Time

The amount of time that should be required to complete a task or process based on normal working conditions and average worker performance.

Average Observed Time

The mean time recorded across multiple observations or measurements of a particular variable or activity.