Find formula for actuarial present value of pension benefits

Reference no: EM131001729

Consider a DB plan which provides a yearly pension of 2% of the final 3-year average salary, times the number of years of service, for retirement at ages 63-65, but with a reduction of 5% per year should retirement occur before 65. An employee now 45 was hired at age 35. His/her present salary is 70 000. The salary scale is given by Sx = 1.03 x^-30, x ≥ 30. (This simply means that salaries are expected to increase by 3% per year.) An employee may retire at any age from 63 to 65, with a reduction in pension income of 5% per year. Find a formula for the actuarial present value of the pension benefits.

Reference no: EM131001729

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