Intermediate Accounting
3rd Edition
ISBN: 9780136912644
Author: Elizabeth A. Gordon; Jana S. Raedy; Alexander J. Sannella
Publisher: Pearson Education (US)
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Chapter 7, Problem 7.13E
To determine
The pension obligation that the company has incurred today.
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Assume that a pension plan offers to pay $500,000 on a person's retirement
(his/her sixty-fifth birthday) or a semi-annual annuity for the remainder of the
person's life - i.e., starting 6 months from the date of retirement and including
his/her date of death. Interest rates are 7 percent compounded annually, and a
person's life expectancy has been determined statistically as being 78.5 years.
Calculate the amnunt of the annuity that would make a person indifferent between
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A person joins a pension plan at age 40 (40" birthday). How much will s/he have
to pay into the pension fund each year in order to accumulate a balance of
$500,000 by the time s/he retires (age 65)? Assume that the final payment is on
his/her 60th birthday. Interest rates are 9% compounded semi-annually.
An individual entering the workforce plans to make monthly contributions to a retirement account in the amount of $250 beginning at the end of next month and continuing for the next
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(a) If the retirement account earns 8% compounded monthly, find the amount expected in the retirement account at the end of 40 years. Round to the nearest penny.
(b) If the retirement account charges a maintenance fee of 2% each year, the net interest rate earned by the retiree becomes 6%. Find the amount expected in the retirement
account. Round to the nearest penny.
(c) Compare the answers from part (a) and part (b) above to determine the total percent lost by the retiree due to the fee. Round your answer to two decimal places.
% lost
Assume that a pension plan offers to pay $500,000 on a person's retirement
(his/her sixty-fifth birthday) or a semi-annual annuity for the remainder of the
person's life – i.e., starting 6 months from the date of retirement and including
his/her date of death. Interest rates are 7 percent compounded annually, and a
person's life expectancy has been determined statistically as being 78.5 years.
Calculate the amounț of the annuity that would make a person indifferent between
the options?l .Ysm
Chapter 7 Solutions
Intermediate Accounting
Ch. 7 - Prob. 7.1QCh. 7 - Prob. 7.2QCh. 7 - If interest is compounded more than once a year,...Ch. 7 - Prob. 7.4QCh. 7 - Can an ordinary annuity table be used to determine...Ch. 7 - Prob. 7.6QCh. 7 - Is the present value of an ordinary annuity more...Ch. 7 - Prob. 7.8QCh. 7 - Simple Interest. Assume Shafer Corporation...Ch. 7 - Compound Interest. Assume Shafer Corporation...
Ch. 7 - Prob. 7.3BECh. 7 - Prob. 7.4BECh. 7 - Prob. 7.5BECh. 7 - Present Value of a Single Sum, Compound Interest....Ch. 7 - Future Value of a Single Sum, Compound Interest....Ch. 7 - Prob. 7.8BECh. 7 - Present Value of a Single Sum, Compounded Interest...Ch. 7 - Prob. 7.10BECh. 7 - Present Value of a Single Sum, Calculating Time...Ch. 7 - Future Value of an Ordinary Annuity. An...Ch. 7 - Future Value of an Annuity Due. Mariah Carey...Ch. 7 - Future Value of an Ordinary Annuity: Calculating...Ch. 7 - Present Value of an Ordinary Annuity. CB...Ch. 7 - Present Value of an Annuity Due, Semiannual...Ch. 7 - Prob. 7.17BECh. 7 - Ordinary Annuity, Annuity Due, Using Interest...Ch. 7 - Prob. 7.2ECh. 7 - Prob. 7.3ECh. 7 - Prob. 7.4ECh. 7 - Prob. 7.5ECh. 7 - Prob. 7.6ECh. 7 - Prob. 7.7ECh. 7 - Future Value of an Ordinary Annuity, Future Value...Ch. 7 - Single Sum, Solving for Other Variables. Two...Ch. 7 - Ordinary Annuity, Solve for Interest Rate,...Ch. 7 - Present Value, Note Payable Prices. Wiz Khalifa...Ch. 7 - Future Value of a Deterred Annuity. Lenny Shafer...Ch. 7 - Prob. 7.13ECh. 7 - Present Value of an Ordinary Annuity, Present...Ch. 7 - Prob. 7.15ECh. 7 - Prob. 7.16ECh. 7 - Future Value of an Annuity Due, Decision Making....Ch. 7 - Prob. 7.18ECh. 7 - Prob. 7.19ECh. 7 - Prob. 7.20ECh. 7 - Prob. 7.21ECh. 7 - Prob. 7.22ECh. 7 - Prob. 7.1PCh. 7 - Present Value, Present Value of an Ordinary...Ch. 7 - Present Value, Present Value of an Annuity Due,...Ch. 7 - Prob. 7.4PCh. 7 - Prob. 7.5PCh. 7 - Prob. 7.6PCh. 7 - Prob. 7.7PCh. 7 - Present Value of an Annuity Due, Deferred...Ch. 7 - Present Value of an Ordinary Annuity, Present...Ch. 7 - Future Value of an Ordinary Annuity, Deferred...Ch. 7 - Present Value, Present Value of an Ordinary...Ch. 7 - Prob. 7.12PCh. 7 - Prob. 7.13PCh. 7 - Prob. 7.14PCh. 7 - Prob. 7.15P
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