If each individual retires at age $65,$ how much

will his or her estimated pension be$?$

Life expectancy for both employees is $15$ years

at age $65.$ If the firm buys an annuity from an

insurance company to fund each pension and

the insurance company asserts it is able to

earn $9$ percent on the funds invested in the an$-$

nuity, what is the cost or the amount required

to purchase the annuity contracts?

If the firm can earn $8$ percent on the money

it must invest annually to fund the pension,

how much will the firm have to invest annu$-$

ally to have the funds necessary to purchase

the annuities?

What would be the impact of each of the fol$-$

lowing on the amount that the firm must in$-$

vest annually to fund the pension?

a$)$ Life expectancy is increased to $20$ years.

b$)$ The rate of interest on the annuity contract

with the insurance company is reduced to

$7$ percent.

c$)$ Barber retires at age $62$ instead of $65.$

returns different?

Investor A makes a cash purchase of $100$ shares of $AB$&$C$ common stock for $$55$ a

share. Investor $B$ also buys $100$ shares of $AB$&$C$ but uses margin. Each holds the stock

for one year, during which dividends of $$5$ a share are distributed. Commissions are

$2$ percent of the value of a purchase or sale; the margin requirement is $60$ percent,

and the interest rate is $10$ percent annually on borrowed funds. What is the percent$-$

age earned by each investor if he or she sells the stock after one year for $($a$)$ $$40,($b$)$

$$55,($c$)$ $$60,$ and $($d$)$ $$70?$ If the margin requirement had been $40$ percent, what would

have been the annual percentage returns? What conclusion do

imply?