[Related to Solved Problem 3.18] Some companies offer their employees defined benefit pension plans. Under these plans, employees are promised a fixed monthly payment after they retire. The federal government regulates some aspects of these plans Areporter for the Wall Street Journal wrote that under a former employer's pension plan she was to receive $423 per month beginning in 14 years when she turned 65 years old. She received a letter from her former employer offering a one-time payment of $32.088 in exchange for her agreeing not to receive the monthly pension payments Source: Anne Tergesen, "Should You Take a Lump-Sum Pension Offer?" Wall Street Journal June 5, 2015 Suppose that the reporter's former employer expects that the reporter will live to be 85 years old. That means she would receive the pension payments for 20 years The total amount she would receive would be $423 per month x 12 months per year x 20 years $101,520 Should she turn down the one-time payment? OA. Yes, the interest rate would have to be higher than 8.5% to justify such a low one-time payment OB. Yes, the one-time payment is less than a third of the amount she would receive in pension payments OC. Maybe, the present value of future payments depends on interest rates, which are unknown OD. No, her employer might go out of business
[Related to Solved Problem 3.18] Some companies offer their employees defined benefit pension plans. Under these plans, employees are promised a fixed monthly payment after they retire. The federal government regulates some aspects of these plans Areporter for the Wall Street Journal wrote that under a former employer's pension plan she was to receive $423 per month beginning in 14 years when she turned 65 years old. She received a letter from her former employer offering a one-time payment of $32.088 in exchange for her agreeing not to receive the monthly pension payments Source: Anne Tergesen, "Should You Take a Lump-Sum Pension Offer?" Wall Street Journal June 5, 2015 Suppose that the reporter's former employer expects that the reporter will live to be 85 years old. That means she would receive the pension payments for 20 years The total amount she would receive would be $423 per month x 12 months per year x 20 years $101,520 Should she turn down the one-time payment? OA. Yes, the interest rate would have to be higher than 8.5% to justify such a low one-time payment OB. Yes, the one-time payment is less than a third of the amount she would receive in pension payments OC. Maybe, the present value of future payments depends on interest rates, which are unknown OD. No, her employer might go out of business
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
Related questions
Question
![[Related to Solved Problem 3.1B] Some companies offer their employees defined benefit pension plans. Under these plans, employees are promised a fixed
monthly payment after they retire. The federal government regulates some aspects of these plans A reporter for the Wall Street Journal wrote that under a former
employer's pension plan she was to receive $423 per month beginning in 14 years when she turned 65 years old. She received a letter from her former employer
offering a one-time payment of $32,088 in exchange for her agreeing not to receive the monthly pension payments
Source: Anne Tergesen, "Should You Take a Lump-Sum Pension Offer?" Wall Street Journal, June 5, 2015
Suppose that the reporter's former employer expects that the reporter will live to be 85 years old. That means she would receive the pension payments for 20 years
The total amount she would receive would be $423 per month x 12 months per year x 20 years $101.520 Should she turn down the one-time payment?
OA. Yes, the interest rate would have to be higher than 8.5% to justify such a low one-time payment
OB. Yes, the one-time payment is less than a third of the amount she would receive in pension payments
OC. Maybe, the present value of future payments depends on interest rates, which are unknown
OD. No, her employer might go out of business](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F6967809e-7a9d-47ec-9c0d-a9511f5ec028%2Fe1affb46-943d-45c5-be9f-2c5f38317859%2Fpemk6lj_processed.jpeg&w=3840&q=75)
Transcribed Image Text:[Related to Solved Problem 3.1B] Some companies offer their employees defined benefit pension plans. Under these plans, employees are promised a fixed
monthly payment after they retire. The federal government regulates some aspects of these plans A reporter for the Wall Street Journal wrote that under a former
employer's pension plan she was to receive $423 per month beginning in 14 years when she turned 65 years old. She received a letter from her former employer
offering a one-time payment of $32,088 in exchange for her agreeing not to receive the monthly pension payments
Source: Anne Tergesen, "Should You Take a Lump-Sum Pension Offer?" Wall Street Journal, June 5, 2015
Suppose that the reporter's former employer expects that the reporter will live to be 85 years old. That means she would receive the pension payments for 20 years
The total amount she would receive would be $423 per month x 12 months per year x 20 years $101.520 Should she turn down the one-time payment?
OA. Yes, the interest rate would have to be higher than 8.5% to justify such a low one-time payment
OB. Yes, the one-time payment is less than a third of the amount she would receive in pension payments
OC. Maybe, the present value of future payments depends on interest rates, which are unknown
OD. No, her employer might go out of business
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 3 steps
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, economics and related others by exploring similar questions and additional content below.Recommended textbooks for you
Principles of Economics (12th Edition)
Economics
ISBN:
9780134078779
Author:
Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher:
PEARSON
Engineering Economy (17th Edition)
Economics
ISBN:
9780134870069
Author:
William G. Sullivan, Elin M. Wicks, C. Patrick Koelling
Publisher:
PEARSON
Principles of Economics (12th Edition)
Economics
ISBN:
9780134078779
Author:
Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher:
PEARSON
Engineering Economy (17th Edition)
Economics
ISBN:
9780134870069
Author:
William G. Sullivan, Elin M. Wicks, C. Patrick Koelling
Publisher:
PEARSON
Principles of Economics (MindTap Course List)
Economics
ISBN:
9781305585126
Author:
N. Gregory Mankiw
Publisher:
Cengage Learning
Managerial Economics: A Problem Solving Approach
Economics
ISBN:
9781337106665
Author:
Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher:
Cengage Learning
Managerial Economics & Business Strategy (Mcgraw-…
Economics
ISBN:
9781259290619
Author:
Michael Baye, Jeff Prince
Publisher:
McGraw-Hill Education