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Basic Question 12 of 17

A higher rate of compensation increase ______ service cost and ______ interest cost.

A. decreases, increases.
B. increases, decreases.
C. increases, increases.
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User Contributed Comments 2

User Comment
rodney176 How does compensation affect the discount rate ?
merc5559 It doesn't. Interest cost= PBO x Discount Rate. Higher rate of compensation leads to higher PBO which leads to higher interest cost.
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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 how adjusting for items of pension and other post-employment benefits that are reported in the notes to the financial statements affects financial statements and ratios;

interpret pension plan note disclosures including cash flow related information;

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