A pension plan promises to pay $75,000 at the end of each year of the retirement period.
Requirements:
Compute the funds required to fund this pension plan at the start of the retirement period assuming:
a.discount rate of 9% and a retirement period of 30 years; or
b.discount rate of 9% and a retirement period of 40 years.

Question

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The Answer is

\begin{array}{ll}a.~~ ext { Expected annual benefits } & \$ 75,000 \\~~~~~~ ext { PVFA(9\%,30) } & \underline{ imes 10.27365} \\~~~~~~ ext { Assets required to fund payments during retirement } & \underline{\$ 770,524}\end{array}

\begin{array}{ll}b.~~ ext { Expected arnual benefits earned per year of service } & \$ 75,000 \\~~~~~~ ext { PVFA(9\%,40) } & \underline{ imes 10.75736} \\~~~~~~ ext { Assets required to fund payments during retirement } & \underline{\$ 806,802}\end{array}

A Pension Plan Promises to Pay $75,000 at the End