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# Corporate Finance

A corporation has decided to provide a pension for a key employee who is scheduled to retire in 12 years (assume that today is January 1, 2000 and the employee will start their retirement on January 1, 2012). This pension is to provide a 20-year annuity for the employee with annual end-of-year payments of \$65,000, with the first annuity payment being made on December 31, 2012. The company will fund this pension with 12 equal annual payments, with the first being made at the end of the year (December 31, 2000). The fund is expected to earn 5.5% each year for the next 12 years, afterwhich the fund is expected to earn 10% each year. What should the annual payments be in order to fund this pension? (Rounded to the nearest whole dollar)

a. \$31,453
b. \$32,012
c. \$32,519
d. \$33,772
e. \$44,935

#### Solution Preview

A corporation has decided to provide a pension for a key employee who is scheduled to retire in 12 years (assume that today is January 1, 2000 and the employee will start their retirement on January 1, 2012). This pension is to provide a 20-year annuity for the employee with annual end-of-year payments of \$65,000, with the first annuity payment being made on December 31, ...

#### Solution Summary

This solution is comprised of a detailed explanation to answer what should the annual payments be in order to fund this pension.

\$2.19