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How caterpillar stock has performed

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Reference no: EM132817504

Problem 1: Suppose Caterpillar's defined-benefit pension plan offers a retirement benefit tied to years of service and final salary (like most DB plans) and that the retirement benefit is further increased by a fixed 3% per year each year. Caterpillar plans to change the retirement-plan formula so the amount of the retirement benefit increase is positively correlated to how Caterpillar's stock has performed (rather than the fixed 3% rate). This change in the retirement-benefit formula will cause the appropriate discount rate for the DB plan benefit to:

1. Decrease
2. Stay the same
3. Increase

Reference no: EM132817504

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