The Ritz Company Has a 40-Year-Old Employee That Will Retire

The Ritz Company has a 40-year-old employee that will retire at age 60 and live to age 75. The firm has promised a retirement income of $20,000 at the end of each year following retirement until death. The firm's pension fund is expected to earn 7 percent annually on its assets and the firm uses 7% to discount pension benefits. What is Ritz's annual pension contribution to the nearest dollar for this employee? (Assume certainty and end-of-year cash flows.)

A) $2,756
B) $3,642
C) $4,443
D) $4,967
E) $5,491

Correct Answer:

Verified

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