A corporate pension plan has to makethe following payments over the nextfew years:Year1 2 3 4Amount ($ million) 29 33 39 47NO CHAT GPT, HAND WRITTEN ONLY OTHERWISE WILLLEAVE A DOWNVOTEThe appropriate interest rate is 8%.What is the present value of theliability (in $ million)?What is the duration of the liability?

Answered: Image /qna-images/answer/36e28a9a-15d4-4c9e-bf08-26bb1300a3de.jpg

Answered: A corporate pension plan has to make…

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

See similar textbooks

Similar questions

A defined benefit pension plan expects to pay out $23 million per year over the next 27 years to pensioners. The fund currently has $176 million in pension assets that are earning 8.2% per year. By how much is this plan over/under funded? (Do not round intermediate calculations. Round your answer to a whole number. Use a negative sign to denote underfunded)
1. Assume you deposit $3,000 today, and $300 at the end of each year, in an account earning 4% per year for 20 years. What is the future value? 2. General Electric has an unfunded pension liability of $300 million that must be paid in 15 years. The CFO deposits $10 million in account today to help meet this goal, and will also deposit $8 million at the end of the next 15 years, to meet this liability. What annual rate of interest must the account earn to meet the liability? 3. What is the present value of an ordinary annuity that promises $20,000 per year for 20 years if the appropriate discount rate is 5%? 4. What is the present value of an annuity due that promises $20,000 per year for 20 years if the appropriate discount rate is 5%?
NOTE: Provide a format and show your work (example: N = 6, PV = XXX, I = X%, etc.) It is now the year 2048 and you have amassed a retirement fund of $1.2 million. You want to retire in 13 years (year 2061). At the time, you plan to start withdrawing $20,000 per month.If your investment fund is invested at a 6.0 percent rate, how many months will it last you once you start to withdraw the money? (Assume monthly compounding. Do not round intermediate calculations and round your final answer to 2 decimal places.) Hint: draw a timeline to help visualize the problem.
A client, age 50, who is currently earning $100,000 per year, wishes to retire in 15 years with a fixed annual retirement income of $125,000. The client expects to live 25 years in retirement and is comfortable assuming a rate of return of 8% and inflation of 3%. What is the capital amount required at the onset of retirement to support the client’s retirement income? a) $1,441,095 b) $1,874,532 c) $2,336,367 d) $1,334,347
To insure you, Assurances Nochance Ltd offers the following plan: you will pay 20 annual payments of $8,000 starting one year from today. Then, in year 21, you or your heirs will receive a pension for the following 15 years. The discount rate used by the company to calculate your pension is 6%. (a) What is the size of your annual pension? (b) If you could take a one‐time lump sum payment 25 years from today instead of the pension, how high would the equivalent lump sum payment have to be?
Q3) Mr. Clifton Chen, aged 39, recently purchased an endowment plan from an insurer that requires him to set aside $25,000 per year for the next 23 years till he retires at age 62. The first premium payment occurs at the beginning of the period. Assuming an inflation rate of 2% and an estimated rate of return of 3.2% from the endowment plan, what is the estimated future value of Clifton’s regular savings at age 62?
An insurer is designing a 10-year single premium variable annuity policy with a guaranteed maturity benefit of 85% of the single premium. (a) Calculate the value of the GMMB at the issue date for a single premium of $100. (b) Calculate the value of the GMMB two years after issue, assuming that the policy is still in force, and that the underlying stock prices have decreased by 5% since inception. Basis and policy information: Age at issue: 60 Front end expense loading: 2% Annual management charge: 2% at each year end (including the first) Survival model: Standard Ultimate Survival Model Lapses: 5% at each year end except the final year Risk-free rate: 4% per year, continuously compounded Volatility: 20% per year
You manage a pension fund that will provide retired workers with lifetime annuities. You determine that the payouts of the fund are going to closely resemble level perpetuities of $1.4 million per year. The interest rate is 8%. You plan to fully fund the obligation using 5-year and 20-year maturity zero-coupon bonds.Required: a. How much market value of each of the zeros will be necessary to fund the plan if you desire an immunized position?
Hello. I am unsure how to solve this corporate finance problem without using excel. You will pay into a pension fund until you are aged 65. You are expected to live untilyour 80th birthday. You are currently 21 years of age. Pension fund contributions are madebi-weekly (use n=2/52) beginning in 2 weeks time. If you are promised an interest rate of7% compounded monthly, what should be the size of your contribution if you plan to have $1 million at age 65?
Assume an investor wishes to have £80,000 ten years from now as a retirement fund. How much money would have to be invested today at 6 percent compound interest? Group of answer choices £4,800 £8,000 £44,673 £54,0000
Ordinary annuity that pays $1,000 at the end of each of the next 5 years if the interest rate is 15%. Inputs: PMT = $1,000 N = 5 I/YR = 15% PV = $3,352.16 FV= $6,742.38 How would the PV and FV of the above annuity change if it were an annuity due rather than an ordinary annuity? PV annuity due = ?Exactly the same adjustment is made to find the FV of the annuity due. FV annuity due = ?
You manage a pension fund that will provide retired workers with lifetime annuities. You determine that the payouts of the fund are going to closely resemble level perpetuities of $1.8 million per year. The interest rate is 10%. You plan to fully fund the obligation using 5-year and 20-year maturity zero-coupon bonds.Required: a. How much market value of each of the zeros will be necessary to fund the plan if you desire an immunized position? (Do not round intermediate calculations. Enter your answers in millions. Round your answers to 1 decimal place.) Market Value Five-Year ___ Million Twenty-Five Year ___ Million b. What must be the face value of each of the two zeros to fund the plan? (Do not round intermediate calculations. Enter your answers in millions rounded to 2 decimal places.) Face Value Five-Year ___ Million Twenty-Five Year ___ Million

SEE MORE QUESTIONS

Recommended textbooks for you

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Foundations Of Finance

Finance

ISBN:

9780134897264

Author:

KEOWN, Arthur J., Martin, John D., PETTY, J. William

Publisher:

Pearson,

Fundamentals of Financial Management (MindTap Cou…

Finance

ISBN:

9781337395250

Author:

Eugene F. Brigham, Joel F. Houston

Publisher:

Cengage Learning

Corporate Finance (The Mcgraw-hill/Irwin Series i…

Finance

ISBN:

9780077861759

Author:

Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor

Publisher:

McGraw-Hill Education

SEE MORE TEXTBOOKS