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An employee starts employment in a firm at age 35 and is offered a choice of either a DC or a DB plan. In the DC plan, contributions of 15% of salary are accumulated with interest at 4% until age 65 and then used to buy a life annuity. Under the DB plan, the employee is given an annual amount, beginning at age 65 of 1.8% of their 3 years average salary times the number of years of service. If the cost of a 1-unit life annuity at age 65 is 10, and salaries increase by 4% per year, find the ratio of the annual income under the DC plan to that of the DB plan, for an employee who remains in the plan until age 65.

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  • Category:- Statistics and Probability
  • Reference No.:- M91710527

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