(Answered) Your states promised pension payments amount to 10 billion

Management Studies

Your state's promised pension payments amount to $10 billion annually, and you expect this obligation to grow at 2% per year. You determine that the riskiness of this obligation is the same as the riskiness of the state's debt. Based on the pricing of that debt you determine that the correct discount rate for the fund's liabilities is 3% per annum. Currently, based on actuarial calculations using 8% as the discount rate, the plan is niether over- nor underfunded - the value of the liabailities exactly matches the value of the assets. What is the extent of the true unfunded liabilities?

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Business Management, Management Studies

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