[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
Economics Today and Tomorrow, Student Edition
1st Edition
ISBN:9780078747663
Author:McGraw-Hill
Publisher:McGraw-Hill
Chapter6: Saving And Investing
Section6.3: Special Savings Plans And Goals
Problem 1R
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![[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
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