Question
Suppose that in a certain defined benefit pension plan. A) employees work for 45 years with wages that increase annually at a real rate of
Suppose that in a certain defined benefit pension plan.
A) employees work for 45 years with wages that increase annually at a real rate of 2%
B) They retire with a pension equal to 70% of their final salary. This pension increases at the rate of inflation -1%
C) The pension is received for 18 years
D) The pension funds income is invested in bonds that earn inflation + 1.5%
Estimate the % of an employee's salary that must be contributed to the plan for the pension to remain solvent. do calculations in real or nominal dollars.
Need to show work and explain how to setup calculations.
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