Assume the actuary estimates the net cost of providing healt

Assume the actuary estimates the net cost of providing health care benefits to a particular employee during his retirement years to have a present value of $60,000. If the benefits relate to an estimated 25 years of service and five of those years have been completed:

Multiple Choice

The APBO would be $8,400.

The EPBO would be $8,400.

The EPBO would be $12,000.

The APBO would be $12,000.

Solution

D. The APBO would be $12,000.

If the benefits relate to an estimated 25 years of service and five of those years have been completed, the APBO would be:

= $60,000 x 5/25 = $12,000 APBO