kkn006

93. What was the most likely cause of the actuarial gain reported in the reconciliation of the projected benefit obligation for the year ended 2008?

A. Incrase in the average life expectancy of the participating employees.
B. Decrease in the expected rate of returrn.
C. Increase in the discount rate.


Your answer: C was correct!
The assumed discount rate increased from 6.25% in 2007 to 6.75% in 2008 (Exhibit 5). There is an inverse relationship between the discount rate and the present value of a future sum. Thus, the increase in the discount rate resulted in an actuarial gain (lower PBO). An increase in life expectancy would result in an actuarial loss.

jacksparrow

93. What was the most likely cause of the actuarial gain reported in the reconciliation of the projected benefit obligation for the year ended 2008?

A. Increase in the average life expectancy of the participating employees.
B. Decrease in the expected rate of return.
C. Increase in the discount rate.


Your answer: C was correct!
The assumed discount rate increased from 6.25% in 2007 to 6.75% in 2008 (Exhibit 5). There is an inverse relationship between the discount rate and the present value of a future sum. Thus, the increase in the discount rate resulted in an actuarial gain (lower PBO). An increase in life expectancy would result in an actuarial loss.



Edited 1 time(s). Last edit at Thursday, May 27, 2010 at 08:13PM by the show NY.