A Defined Benefit Pension Plan Has Expected Payouts of $15

question 30

Multiple Choice

A defined benefit pension plan has expected payouts of $15 million per year for eight years and then $20 million per year over the following 15 years. Actuaries have estimated that the fund can be expected to earn an average of 5.25 percent on its assets. The fund currently has reserves of $185,475,000. The plan is ________ by about ________ million.

• A)underfunded; $100
• B)underfunded; $59
• C)overfunded; $30
• D)overfunded; $24
• E)underfunded; $46

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Definitions:

Factory Costs

The total expenses incurred in the manufacturing process, including labor, materials, and overhead costs.

Economies of Scale

Advantages in terms of costs that companies realize by enlarging their scale of operations, with the unit cost of production generally falling as the scale increases.

Total Product

The overall quantity of output that a firm produces, usually within a given period of time, based on the input of resources.

Marginal Product

The additional output that is produced by employing one more unit of a particular input, such as labor or capital.