Question

UESTION 33 Ms. Lloyd, who is 25 and expects to retire at age 60, has just been hired by the Chambers Corporation. Ms. Lloyd's current salary is $30,000 per year, but her wages are expected to increase by 5 percent annually over the next 35 years. Chambers 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 Ms. Lloyd's expected annual retirement benefit, rounded to the nearest thousands of dollars?

Answer 1

FV= $330,942.65

Step-by-step explanation:

Giving the following information:

Lloyd, who is 25 and expects to retire at age 60, has just been hired by the Chambers Corporation.

Ms. Lloyd's current salary is $30,000 per year,

Her wages are expected to increase by 5 percent annually over the next 35 years.

Chambers has a defined benefit pension plan in which workers receive 2 percent of their final year's wages for each year of employment.

We need to use the final value formula:

FV= PV*(1+i)^n

In this exercise:

FV= [30000*(1.05^35)]*1.02^35= $330,942.65