Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Question
Edwards company just hired another employee Jane, the Edwards company provides supplemental retirement benefits to its employees realizing the insufficiency of the Social Security benefits or comfortable retirement life Edwards has asked you to perform the necessary computations pertaining to the retirement benefit for Gene. Jane’s current salary is $40,000. Jane will be entitled to the supplementary retirement benefits after 20 years of work the start of the 21st year The retirement plan will last for 25 years per company practices Jane will be granted with a year and salary increase of 2% per year effective January 1 of each year that she works the amount of annual retirement benefit is going to be 45% of James salary right before the start of the retirement and will be paid at the start of each year. Any invested funds for pension will earn 4% compounded annually,
compute Jane’s annual retirement benefit.
Assume James’s retirement benefit is $32,000 what amount must be on deposit right before the start of Jane’s retirement in order to ensure that all the retirement benefits will be paid
Assume the amount that must be on deposit right before the start of Jane’s retirement in order to ensure that all the retirement benefits will be paid is $550,000 what amount should Edwards company set aside at the end of each year for the next 20 years during the years that jane is working in order to assure that all the retirement benefits will be paid and honored 
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