Fred’s company has a defined-benefit pension plan. Suppose the plan pays a benefit equal to 1% of final salary per year of service. Fred is 40 years old and has worked for the company for 15 years. His last year’s salary was $50,000 and is expected to remain so in real terms until retirement. The expected rate of inflation is 4%.

a. If normal retirement age is 65, the interest rate is 8%, and Fred’s life expectancy is 80, what is the present value of his accrued pension benefit?