Statistics problem.

2

1.

2. An employer establishes a DC plan. Contribution rates are determined assuming: - Contributions payable monthly in arrears as a fixed % of salary. - Earnings of 9% on accumulated contributions. - Salaries increase at 0.375% monthly. - Retirement at age 63. - At retirement, the employee buys a single life annuity due payable monthly. Annuity

priced at 5% annually; 63 13.213.a  - You are given (12) 1.000197  and (12) 0.466508  at 5%.

Questions

a. Calculate projected salary at retirement age, assuming first month’s salary is S. b. If monthly contribution is c, show that the accumulation at 9% of all contributions is

480 480 12

1

1

(1.00375) (1.09)

k

k

k

c S





  =

40 480

1/12 1

(1.09) 1.00375

1.00375 1.09

k

k

cS



       and solve.

3.

Continued….

3

3. Continued

4.

4

5.

6.

5

7.

Tables follow:

6

Service Table (16.4)

7

Salary Scale (16.1)