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Suppose Ford's defined-benefit pension plan offers a retirement benefit tied to years of service and final salary and that the retirement benefit is further increased
Suppose Ford's defined-benefit pension plan offers a retirement benefit tied to years of service and final salary and that the retirement benefit is further increased by a fixed 5% per year each year.Ford plans to change the retirement-plan formula so the amount of the retirement benefit increase is positively correlated to how Ford's stock has performed (rather than the fixed 5% rate).What will be the impact to the appropriate discount rate?
Increase? Decrease? Or stay the same?
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