Question

Hey. I was trying to figure out this problem but wasn't sure what the correct answer...

Hey. I was trying to figure out this problem but wasn't sure what the correct answer is. I would appreciate it. Thank you.

How do you calculate projected benefit obligation (PBO)?

A. Use the present value of expected retirement annuity payments, earned by the empolyee so far

B. Use the undiscounted sum of all future retirement payments

C. Use the present value of vested retirement payments

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Answer #1

The correct answer is

A) Use of the present value of expected retirement annuity payments, earned by the employee so far.

Explanation

A projected benefit obligation are the future liabilities which will be paid in by the company in future, so to calculate the value of its today, we have to discount all the future outflows to present value. So future annuity payments earned so far are discounted to present value to calculate the projected benefit obligation.

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