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1-Christian wants to retire in 15 years when he turns 65. Christian wants to hav

ID: 2660314 • Letter: 1

Question

1-Christian wants to retire in 15 years when he turns 65.

Christian wants to have enough money to replace 75% of his current income less what he expects to receive from Social Security at the beginning of each year. He expects to receive

$18,000 per year from Social Security in today's dollars.

Christian is aggressive and wants to assume an 8% annual investment rate of return and that inflation will be 3% per year. Based on his family history, Christian expects that he will live to be 95 years old. If Christian currently earns

$80,000 per year and he expects his raises to equal the inflation rate, how much does he need at retirement to fulfill his retirement goals?

(a) $1,022,807.

(b) $1,072,458.

(c) $1,559,131.

(d) $1,583,152.

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2. A company's defined benefit pension plan utilizes a funding formula that  considers  years  of  service  and  average compensation to determine the pension benefit payable to the plan participants. If Kim is a participant in this defined benefit pension plan and she has 30 years of service with the company and average compensation of $75,000, what is the maximum pension benefit that can be payable to Kim at her retirement?

(a) $15,500.

(b) $46,000.

(c) $75,000.

(d) $185,000.

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3. Which of the following employees is a key employee for 2013?

1. Matt, an officer of the company, who earns $100,000 per year and owns 2% of the company.

2. Missy, who earns $37,000 per year and owns 5% of the

company.

3. Tara, an officer of the company who earns $175,000.

4. Julie, a 10% owner of the company who earns $24,000 per

year as a secretary.

(A) 4 only.

(B) 3 and 4

(C) 2 and 3

(D) 1, 3, and 4.

Explanation / Answer

1. b

2. c

3. c

4 d

5. b

6 a