Calculating Benefits, Alpha, and Pension Contribution
Not what you're looking for?
The group cannot come to a decision regarding which is correct. Please help. For #1 - 1 voted for $35,00, 2 voted for $89,000 and 2 voted $116,000; #2 - 3 voted for -0.75% while 2 voted for 0% and 1 voted 0.15; #3 - 3 voted for $2,756 while 2 voted for $4,443. This the the first time we have all had a difference as such.
1. The Apex Company has just hired Mr. Smith, who is age 25 and is expected to retire at age 60. Mr. Smith's current salary is $30,000 per year, but his wages are expected to increase by 5 percent annually over the next 35 years. Apex has a defined benefit pension plan in which workers receive 2 percent of their final year's wages for each year of employment. Assume a world of certainty. Further, assume that all payments occur at year-end. What is Mr. Smith's expected annual retirement benefit, rounded to the nearest thousands of dollars?
a. $ 35,000
b. $ 57,000
c. $ 89,000
d. $116,000
e. $132,000
2. Midwest Investment Consultants (MIC) operates several stock investment portfolios that are used by firms for investment of pension plan assets. Last year, one portfolio had a realized return of 12.6 percent and a beta coefficient of 1.15. The average T-bond rate was 7 percent and the realized rate of return on the S&P 500 was 12 percent. What was the portfolio's alpha?
a. -0.75%
b. -0.15%
c. 0%
d. 0.15%
e. 0.75%
3. The Ritz Company has a 40-year-old employee that will retire at age 60 and live to age 75. The firm has promised a retirement income of $20,000 at the end of each year following retirement until death. The firm's pension fund is expected to earn 7 percent annually on its assets and the firm uses 7% to discount pension benefits. What is Ritz's annual pension contribution to the nearest dollar for this employee? (Assume certainty and end-of-year cash flows.)
a. $2,756
b. $3,642
c. $4,443
d. $4,967
e. $5,491
Purchase this Solution
Solution Summary
The expert calculates the benefits, alpha and pension contributions. The expecting annual retirement benefits are determined.
Solution Preview
Thank you for requesting me to answer your post :)
Please find the solutions attached.
1. The Apex Company has just hired Mr. Smith, who is age 25 and is expected to retire at age 60. Mr. Smith's current salary is $30,000 per year, but his wages are expected to increase by 5 percent annually over the next 35 years. Apex has a defined benefit pension plan in which workers receive 2 percent of their final year's wages for each year of employment. Assume a world of certainty. Further, assume that all ...
Education
- BA, Ain Shams University, Cairo Egypt
- MBA, California State University, Sacramento
Recent Feedback
- "ty i have more need help with"
- "ty i have jmore i need help with"
- "great help"
- "excellent help"
- "Very helpful and easy to understand."
Purchase this Solution
Free BrainMass Quizzes
Transformational Leadership
This quiz covers the topic of transformational leadership. Specifically, this quiz covers the theories proposed by James MacGregor Burns and Bernard Bass. Students familiar with transformational leadership should easily be able to answer the questions detailed below.
Understanding Management
This quiz will help you understand the dimensions of employee diversity as well as how to manage a culturally diverse workforce.
Managing the Older Worker
This quiz will let you know some of the basics of dealing with older workers. This is increasingly important for managers and human resource workers as many countries are facing an increase in older people in the workforce
Understanding the Accounting Equation
These 10 questions help a new student of accounting to understand the basic premise of accounting and how it is applied to the business world.
Business Ethics Awareness Strategy
This quiz is designed to assess your current ability for determining the characteristics of ethical behavior. It is essential that leaders, managers, and employees are able to distinguish between positive and negative ethical behavior. The quicker you assess a person's ethical tendency, the awareness empowers you to develop a strategy on how to interact with them.