4. U sing a Spreadsheet to Calculate Pension Benefit Payments: Your employer uses a final pay formula

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4. U sing a Spreadsheet to Calculate Pension Benefit Payments: Your employer uses a final pay formula to determine retirement payments to its employees.

You have 20 years of service at the company and are considering retirement some time in the next 10 years. Your employer uses a final pay formula by which you receive an annual benefit payment of 4 percent of your average salary over the last three years of service times the number of years employed.

Calculate the annual benefit if you retire now, in 2 years, 5 years, 8 years, and 10 years using the estimated annual salary during the last three years of service listed below. ( LG 18-2)

Average Retire Salary ⴝ⬎ The Payment Will Be Now $50,000 50,000 ⫻ .04 ⫻ 20 ⫽ $40,000 In 2 years 51,005 51,005 ⫻ .04 ⫻ 22 ⫽ $44,884 In 5 years 52,551 52,551 ⫻ .04 ⫻ 25 ⫽ $52,551 In 8 years 54,143 54,143 ⫻ .04 ⫻ 28 ⫽ $60,640 In 10 years 55,231 55,231 ⫻ .04 ⫻ 30 ⫽ $66,277

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Financial Markets And Institutions

ISBN: 9780071086745

5th International Edition

Authors: Anthony Saunders, Marcia Cornett

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