This question is asking us to determine the impact of an increase in the health care trend rate on a company’s debt to equity ratio. Given the rate increase, the PBO increases (and thus liabilities increases). Additionally, stockholder’s equity decreases by the same amount. Is this because this is a change in actuarial assumption? The actuarial loss decreases OCI and thus stockholder’s equity? It seems logical to me, but any clarification will help. Thanks!
That’s it exactly.