- CFA Exams
- CFA Level I Exam
- Topic 3. Financial Statement Analysis
- Learning Module 12. Employee Compensation: Post-Employment and Share-Based
- Subject 4. Other Post-Retirement Benefits
CFA Practice Question
On December 31, 2010, the expected postretirement benefit obligation was $300 million. The accumulated postretirement benefit obligation was $175 million. Service cost for 2011 was $60 million. The actuary's discount rate is 8%. What was the interest cost for 2011?
B. $18.8 million.
C. $24.0 million.
A. $14.0 million.
B. $18.8 million.
C. $24.0 million.
Correct Answer: A
8% x $175.
User Contributed Comments 6
| User | Comment |
|---|---|
| george2006 | The interest cost for pension plan is based on begining balance of the PBO, not ABO. Is this correct that other post-retirement benefit plan interest cost is based on ABO, not expected BO? |
| ssradja | i thought the interest cost = PBO * discount rate. here the formula is ABO * discount rate. anybody? |
| creativemny | This question is about the Post-retirement Benefit Obligation which is different then Pension Obligation. APBO is the only measure (there is no PPBO) because companies rarely fund these. |
| ngeorge | yes, this question is for a post-retirement medical plan--not a pension plan. |
| vi2009 | good one! |
| quanttrader | interest cost (post retirement benefit obligation) = apbo * r |