Question

On December 31, 2017, the expected postretirement benefit obligation was $300 million. The accumulated postretirement benefit obligation was $175 million. Service cost for 2018 was $60 million. The actuary's discount rate is 8%. What was the interest cost for 2018?

Answer 1

The answer is: $14 million

Step-by-step explanation:

To determine the interest cost for 2018 we should use the following formula, where only accumulated postretirement benefit obligation is subject to interest cost:

interest cost = accumulated postretirement benefit obligation x discount rate

interest cost = $175 millions x 8% = $14 million