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Corporate Plan Sponsors Are Inclined to Employ as Their Discount

question 14

Multiple Choice

Corporate plan sponsors are inclined to employ as their discount rate for pension liabilities the highest interest rate that will pass muster with ________ (for funding purposes) and also with their external ________ (for accounting purposes) .


Definitions:

Effective Rate

The interest rate on a loan or financial product restated from the nominal rate as an interest rate with annual compound interest payable in arrears.

Annuity Investment

An economic tool designed to disburse a consistent flow of funds to someone, primarily for retirement preparation purposes.

Effective Interest Rate

The real rate of interest earned or paid on an investment or loan, taking into account the effect of compounding over a specific period.

Maturity Value

The total of principal plus interest due on the maturity date of a loan or investment.

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