Pension plan provides lifetime annual income

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1. Last week, Onboard Co. has announced that the next two annual dividends will be in the amount of $2.66 and $4.01, respectively. After that, the dividends will increase by 2.02 percent annually. The required return on this stock is 12.99 percent. What is the current price per share? (Hint: draw this out on a timeline.)

2. A corporation's pension plan provides a lifetime annual income to its employees upon retirement at age 65. The plan provides 3% for each year of service of the employee's salary upon retirement. Those who retire before 65 have their benefit reduced by 1.8% for each year before 65 that they retire.

Russ retires at age 62 with 16 years of service. If his salary upon retirement is $59896, what is his annual pension benefit?

Reference no: EM132053121

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