At XYZ Company, a pension plan pays a whole life annuity-due of 60% of 3-year final average salary for an employee retiring at age 65. If an employee retire early at age x < 65, the 60% factor is reduced by 0.03(65-x), where x < 65 is the age at retirement. An employee born on Jan. 1, 1978 joins XYZ. Company on Jan. 1, 2013 with a salary of 80,000. Salaries increase 4% each year. The employee retires on Jan. 1, 2040. Compute the annual pension benefit. 61.15. 100,000 on that date. An employee aged exactly 62 on January 1, 2010 has an annual salary rate of Salaries are revised annually on December 31 each year. Future salaries are estimated using the salary scale given in the table below, where sy/s, y > x denotes the ratio of salary earned in the year of age from y to y +1 to the salary earned in the year of age x to x + 1, for a life in employment over the entire period (x, y + 1). X Sx 62 3.589 63 3.643 64 3.698 65 3.751 The multiple decrement table below models exits from employment: (i) d) denotes retirements. (ii) d) denotes deaths in employment. (iii) There are no other modes of exit. 62 63 4 d d(2) 52,860 5,068 213 47,579 4,560 214 64 65 38,488 38,488 42,805 4,102 215 The employee has insurance that pays a death benefit equals to 4 times his salary at death if death occurs while employed and prior to age 65; and pays 0 otherwise. The death benefit is payable at moment of death. Assume deaths occur at mid-year. The annual effective rate of interest is 0.05. Calculate the actuarial present value of the death benefit.
Answer rating: 100% (QA)
SOLUTION To calculate the actuarial present value of the death benefit we need to first calculate the probability of death while employed and prior toView the full answer