In determining the present value of the prospective benefits (often referred to as the projected benefit obligation), which of the following are considered by the actuary?
a. Retirement and mortality rate.
b. Interest rates.
c. Benefit provisions of the plan.
d. All of these are considered.
Answer: All of these are considered
In a defined-benefit plan, a formula is used that
a. requires that the benefit of gain or the risk of loss from the assets contributed to the pension plan be borne by the employee.
b. defines the benefits that the employee will receive at the time of retirement.
c. requires that pension expense and the cash funding amount be the same.
d. defines the contribution the employer is to make; no promise is made concerning the ultimate benefits to be paid out to the employees.
Answer: defines the benefits that the employee will receive at the time of retirement
True or False: Purchase returns and purchase discounts are ignored when computing cost-to-retail ratios for the retail method.
Answer: FALSE
