RM 701
You are 20 and plan to work for 45 years until you retire at 65. You expect to live until you are 90. You will collect a pension.
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You are 20 and plan to work for 45 years until you retire at 65. You expect to live until you are 90.

You

will collect a pension. Your annual pension payment will be equal to your final salary times a 3% crediting rate times the number of years that you work.

Your starting salary (paid at the end of the year) is $40,000. You expect to get a 4% annual raise.

Your discount rate is 5%.

ð Draw a timeline and

Identify:

·      Annual salary payment

·      Time of retirement

·      Annual pension payment

·      Value of pension at retirement

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