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Basic Question 11 of 24

A higher discount rate:

A. increases the VBO.
B. decreases the VBO.
C. does not affect the VBO.
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User Contributed Comments 3

User Comment
HenryQ Asset return has nothing to do with pension obligations. Think of them as on the asset side of B/S and separated from liabilities.
rlabog in this case why is the answer "B" - decreases the vested benefit obligation?
davidt876 ecause you're discounting FV of liabilities to PV
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I passed! I did not get a chance to tell you before the exam - but your site was excellent. I will definitely take it next year for Level II.
Tamara Schultz

Tamara Schultz

Learning Outcome Statements

explain and calculate measures of a defined benefit pension obligation (i.e., present value of the defined benefit obligation and projected benefit obligation) and net pension liability (or asset);

describe the components of a company's defined benefit pension costs;

explain and calculate the effect of a defined benefit plan's assumptions on the defined benefit obligation and periodic pension cost;

CFA® 2025 Level II Curriculum, Volume 2, Module 11.