Calculating The Value Of The Pay-Out Annuity At Retirement
Order ID 53563633773 Type Essay Writer Level Masters Style APA Sources/References 4 Perfect Number of Pages to Order 5-10 Pages Description/Paper Instructions
Calculating The Value Of The Pay-Out Annuity At Retirement
Assignment 1
BAUD 3301 Spring 2018
Background : Many cities such as Detroit, MI have been in the news regarding underfunded pension funds. This exercise addresses a simplified version of some of the issues involved (doing this as a starting point is common: the key generally is to address the core work, adding more complexity later to make the analysis more accurate).
One way to handle pension obligations is to set aside money during the employee’s working life to fund an annuity that will pay out during the employee’s retirement years. The calculations will require assumptions about the number of years of working life (use 30 in this exercise), the number of years of pay-out, and the return on investment (interest rate) during the two periods. One article states that for the last 26 years, Detroit has used an interest rate of 8.9% for calculations. Recent research suggests that a more accurate estimate would be 6.3%. Most companies use a rate between 7% and 8%.
Background data:
Life expectancy at age 55: male = 23.68 years, female = 27.31 years
Life expectancy at age 66: male = 15.86 years, female = 18.30 years
Average pension = $30,000 per year
Number years to earn full pension = 30
Number of city employees = 12,900
Number of current retirees = 21,000
Analysis :
We will base the analysis on calculations for an average city employee. Calculations will be per year.
- Calculate the value of the pay-out annuity at retirement. Do this twice: once for 6.3% and once for 8.9%. Use the same number of years for each (you will need to decide how many years to use in this calculation). Estimate the city obligation for each of these (first result times number of city employees).
- Calculate how much must be set aside each year of working life to accumulate the value of the pay-out annuity at retirement. Do this for both 8.9% and 6.3%. Estimate the city obligation for each.
Consider the following questions:
- Does the analysis suggest why a city (e.g. Detroit) might prefer to use an 8.9% return rather than a 6.3% return? Provide an explanation of your answer.
- If the city uses an 8.9% return and in actuality sees a 6.3% return, what are the consequences? For example, determine the shortfall both in value available for annuity and what pay-out can be supported by the actual value accumulated.
- If the shortfall is to be made up by the city, what is the annual obligation incurred? Is this substantial enough to seriously impact city finances?
Report structure
Your report will be in two sections:
Section 1: Report . The first part of your report should describe the calculations you did and the rationale for any decisions (for example, why you chose the number for years of retirement) you made. The second part will summarize any observations or findings you have. The last part will present your responses to the questions. The report section should be between one half and one page long, single spaced.
Section 2: Data . Create and print a table of the provided background data. Print the calculation results in one or more tables for reference by the report section. Any additional calculations you want to include also go in this section.
Grading. The report should look professional (not hand written, neat, well-structured). The report will be graded for clarity (how easy it is to understand you), completeness (no significant gaps in the information provided) and correctness (the values and descriptions are correct). The report will also be graded on adherence to the report standard. Your conclusion should be supported by both the calculation results and the report narrative.
Final Comment : the purpose of this exercise is to provide you with experience using Excel and experience in constructing a coherent report. While future exercises may be focused on coming to the “correct” conclusions, this is not the case with this exercise. The correct conclusion is one that is supported by the presented data and narrative.
RUBRIC
QUALITY OF RESPONSE NO RESPONSE POOR / UNSATISFACTORY SATISFACTORY GOOD EXCELLENT Content (worth a maximum of 50% of the total points) Zero points: Student failed to submit the final paper. 20 points out of 50: The essay illustrates poor understanding of the relevant material by failing to address or incorrectly addressing the relevant content; failing to identify or inaccurately explaining/defining key concepts/ideas; ignoring or incorrectly explaining key points/claims and the reasoning behind them; and/or incorrectly or inappropriately using terminology; and elements of the response are lacking. 30 points out of 50: The essay illustrates a rudimentary understanding of the relevant material by mentioning but not full explaining the relevant content; identifying some of the key concepts/ideas though failing to fully or accurately explain many of them; using terminology, though sometimes inaccurately or inappropriately; and/or incorporating some key claims/points but failing to explain the reasoning behind them or doing so inaccurately. Elements of the required response may also be lacking. 40 points out of 50: The essay illustrates solid understanding of the relevant material by correctly addressing most of the relevant content; identifying and explaining most of the key concepts/ideas; using correct terminology; explaining the reasoning behind most of the key points/claims; and/or where necessary or useful, substantiating some points with accurate examples. The answer is complete. 50 points: The essay illustrates exemplary understanding of the relevant material by thoroughly and correctly addressing the relevant content; identifying and explaining all of the key concepts/ideas; using correct terminology explaining the reasoning behind key points/claims and substantiating, as necessary/useful, points with several accurate and illuminating examples. No aspects of the required answer are missing. Use of Sources (worth a maximum of 20% of the total points). Zero points: Student failed to include citations and/or references. Or the student failed to submit a final paper. 5 out 20 points: Sources are seldom cited to support statements and/or format of citations are not recognizable as APA 6th Edition format. There are major errors in the formation of the references and citations. And/or there is a major reliance on highly questionable. The Student fails to provide an adequate synthesis of research collected for the paper. 10 out 20 points: References to scholarly sources are occasionally given; many statements seem unsubstantiated. Frequent errors in APA 6th Edition format, leaving the reader confused about the source of the information. There are significant errors of the formation in the references and citations. And/or there is a significant use of highly questionable sources. 15 out 20 points: Credible Scholarly sources are used effectively support claims and are, for the most part, clear and fairly represented. APA 6th Edition is used with only a few minor errors. There are minor errors in reference and/or citations. And/or there is some use of questionable sources. 20 points: Credible scholarly sources are used to give compelling evidence to support claims and are clearly and fairly represented. APA 6th Edition format is used accurately and consistently. The student uses above the maximum required references in the development of the assignment. Grammar (worth maximum of 20% of total points) Zero points: Student failed to submit the final paper. 5 points out of 20: The paper does not communicate ideas/points clearly due to inappropriate use of terminology and vague language; thoughts and sentences are disjointed or incomprehensible; organization lacking; and/or numerous grammatical, spelling/punctuation errors 10 points out 20: The paper is often unclear and difficult to follow due to some inappropriate terminology and/or vague language; ideas may be fragmented, wandering and/or repetitive; poor organization; and/or some grammatical, spelling, punctuation errors 15 points out of 20: The paper is mostly clear as a result of appropriate use of terminology and minimal vagueness; no tangents and no repetition; fairly good organization; almost perfect grammar, spelling, punctuation, and word usage. 20 points: The paper is clear, concise, and a pleasure to read as a result of appropriate and precise use of terminology; total coherence of thoughts and presentation and logical organization; and the essay is error free. Structure of the Paper (worth 10% of total points) Zero points: Student failed to submit the final paper. 3 points out of 10: Student needs to develop better formatting skills. The paper omits significant structural elements required for and APA 6th edition paper. Formatting of the paper has major flaws. The paper does not conform to APA 6th edition requirements whatsoever. 5 points out of 10: Appearance of final paper demonstrates the student’s limited ability to format the paper. There are significant errors in formatting and/or the total omission of major components of an APA 6th edition paper. They can include the omission of the cover page, abstract, and page numbers. Additionally the page has major formatting issues with spacing or paragraph formation. Font size might not conform to size requirements. The student also significantly writes too large or too short of and paper 7 points out of 10: Research paper presents an above-average use of formatting skills. The paper has slight errors within the paper. This can include small errors or omissions with the cover page, abstract, page number, and headers. There could be also slight formatting issues with the document spacing or the font Additionally the paper might slightly exceed or undershoot the specific number of required written pages for the assignment. 10 points: Student provides a high-caliber, formatted paper. This includes an APA 6th edition cover page, abstract, page number, headers and is double spaced in 12’ Times Roman Font. Additionally, the paper conforms to the specific number of required written pages and neither goes over or under the specified length of the paper. GET THIS PROJECT NOW BY CLICKING ON THIS LINK TO PLACE THE ORDER
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