A Company Must Decide Their Contribution to Their Pension Plan

question 134

Multiple Choice

A company must decide their contribution to their pension plan based on the probability distribution of the length of life of their retired employees. Suppose the probability distribution of the lifetimes of their employees is approximately a normal distribution with μ = 74 years and σ = 8.6 years.
-What percentage of their retired employees would receive payments beyond age 85?

• A)13.28%
• B)19.87%
• C)19.13%
• D)10.03%
• E)10.90%

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Definitions:

Debt-equity Ratio

The ratio reflecting on the strategic use of shareholders' equity and debt for the purpose of financing assets.

Growth Rate

The rate at which a company's earnings or revenue increases over a specified period, typically expressed as a percentage.

Retained Earnings

The portion of a company's profit that is held back and not paid out as dividends, often used for reinvestment.

Dividend Payout Ratio

A financial metric that shows the proportion of earnings a company pays to its shareholders in the form of dividends, expressed as a percentage of net income.