CONNECT WITH LEARNSMART FOR BODIE: ESSE
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ISBN: 2819440196222
Author: Bodie
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Chapter 21, Problem 6PS
Summary Introduction
To determine:
The retirement
Introduction:
An annuity is a long term investment issued by an insurance company which helps protect a person from the risk of living through without your income. In annuity, your contribution are converted into periodic payments that may last for life.
A retirement annuity is a method of retirement investment quite similar to an IRA. The difference being that it must involve an annuity and is not as actively managed as IRA. And similarities being that a retirement
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Plan Funding
Consolidated Industries is planning to operate for 10 more years and then cease operations. At that time (in 10 years), it expects to have the following pension benefit obligations:
Year
11-15
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$3,500,000
3,000,000
2,500,000
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31-35
2,000,000
1,500,000
The current value of the firm's pension fund is $6.1 million. Assume that all cash flows occur at year-end.
a. Consolidated's expected return on pension assets is 12%, and it uses 12% to discount the expected pension benefit payments. What is the present value of the firm's pension fund
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$
b. Is the plan underfunded or overfunded? Do not round intermediate calculations. Round your answer to two decimal places.
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which means the assets are -Select- than the PV of benefits and the plan is -Select- ☑.
Less or Greater
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Benefits and Contributions
The Certainty Company (CC) operates in a world of certainty. It has just hired Mr. Jones, age 27, who will retire at age 65, draw retirement benefits for 14 years, and die at age 79. Mr. Jones'
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$
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$
c. Assume now that CC hires Mr. Smith at the same…
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