What Are Three Reasons That Employees May Prefer to Save

question 76

Essay

What are three reasons that employees may prefer to save through pensions provided by employers rather than through savings accounts?

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Definitions:

Discounted Payback Method

A capital budgeting technique that calculates the time required to recoup the initial investment in present value terms.

Normal Cash Flows

Cash flows that occur in a predictable pattern, where an initial outlay is followed by a series of income receipts.

Real Internal Rate of Return

The real internal rate of return is the annual rate of growth an investment is expected to generate, adjusted for inflation.

Multiple IRR Problem

A situation in capital budgeting where a project has more than one internal rate of return due to changing cash flow signs over the project's duration.