$[$Related to Solved Problem$3\mathrm{.}1$B$]$ Some companies offer their employees defined benefit pension plans. Under these$$ plans, employees are promised a fixed monthly payment after they retire. The federal government regulates some aspects of these plans. A reporter for the Wall Street Journal wrote that under a former$$ employer's pension plan she was to receive $$$$423$ per month beginning in $14$ years when she turned $65$ years old. She received a letter from her former employer offering a$$ one$-$time payment of $$$$32$ comma $088$ in exchange for her agreeing not to receive the monthly pension payments.

$$Source: Anne$$ Tergesen, open double quoteShould You Take a$$ Lump$-$Sum Pension $$Offer$?$close double quote Wall Street Journal$,$ June$5,2015.$

Part $2$

Suppose that the$$ reporter's former employer expects that the reporter will live to be $85$ years old. That means she would receive the pension payments for $20$ years. The total amount she would receive would be $$$$423$ per monthtimes$12$ months per yeartimes$20$ yearsequals$$$$101$ comma $520.$ Should she turn down the$$ one$-$time payment?

A$.$

$$Maybe$,$ the present value of future payments depends on interest$$ rates, which are unknown.

Your answer is correct.B$.$

$$Yes$,$ the$$ one$-$time payment is less than a third of the amount she would receive in pension payments.

C$.$

$$Yes$,$ the interest rate would have to be higher than $8\mathrm{.}5\%$ to justify such a low$$ one$-$time payment.

D$.$

$$No$,$ her employer might go out of business.

Part $3$

The reporter also noted$$ that, open double quoteregulations that took effect in $2012...$ allow companies to use corporate bond interest$$ rates, rather than the lower ones of Treasury$$ bonds, to calculate the discounted present value of an$$ employee's future pension.close double quote$$If employers were still allowed to use the corporate bond interest rate in offering employees$$ one$-$time payments for giving up their right to a monthly$$ pension, the reporter might be

$$

more

less

inclined to take the offer because the offer would be

$$

higher

lower

than the offer calculated using Treasury bond rates.