CFA Practice Question

There are 334 practice questions for this study session.

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?

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
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