Suppose that Thomas is an employee of Lee Corp. who is enrolled in a defined contribution plan in which the Lee annually contributes 10 percent of salary and the before-tax rate of return each year equals 8 percent. Assume that the cost of a $100 life annuity at retirement equals $900. That is, by giving an insurance company $900 at retirement, the insurer will give the retiree $100 every year until he or she dies.

 What is Thomas's replacement rate (as a percentage of final salary) if he had five years of service and constant salary =$75,000. 

What is Thomas's replacement rate (as a percentage of final salary) if he had five years of service where salary in years 1-3 equals $50,000; salary in years 4-5 equals $100,000

Answer rating: 100% (QA)

To calculate Thomass replacement rate we first need to calculate the total balance in his defined co... View the full answer