an actuary has determined that a company needs to have a $90,000,000 balance in
ID: 2646168 • Letter: A
Question
an actuary has determined that a company needs to have a $90,000,000 balance in its pension fund 20 years from now. An interest rate of 8% is considered appropriate for all pension fund calculations. You are given the following two interest factors: (I) Present value of an ordinary annuity factor at 8% equals 9.8181and (II) future value of an ordinary annuity factor at 8% equals 45.762. How much must the company contribute to the fund each year?
A. $9.1667 million
B. $883.629 million
C. $1.969 million
D. $9.8181 million
Explanation / Answer
SOLUTION:
Contribution for each year = $90,000,000 / 45.762
Contribution for each year = $1.969 million
The future value of an annuity is equal to the appropriate interest rate which is 45.762.
Therefore the correct option is = (C) $1.969 million
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