Exam FAM Practice Question 5
Study guide: Exam FAM
A member of a defined contribution pension plan retires at age 65. You are given:
i) Throughout her membership, 8% of her salary was paid into her individual account.
ii) Her final salary is 90,000.
iii) Her account balance at age 65 is 480,000, and she uses all of it to buy a monthly life annuity.
iv) When she joined, the plan's illustration projected her pension using an annuity price of 12.0 per 1 of annual income, and showed a pension of 40% of final salary.
v) At age 65, because interest rates have fallen and mortality has improved, the annuity costs 15.0 per 1 of annual income.
vi) Long-term interest rates at age 65 are 3%.
Calculate her annual pension.
- A) 7,200
- B) 14,400
- C) 32,000
- D) 36,000
- E) 40,000
Answer this question and see the worked solution