2014 CFAI MOCK - Annual Unit Credit (Pensions)

[ProvidenceCFA]

The question states:
At the end of Smith’s second year of service, the estimated defined benefit obligation arising from his employment is closest to:
Determination of annual unit credit (benefit)
Estimated final salary (Exhibit 1):
$71,261
Estimated annual (end of year) payment in retirement (six years of service, 2014–2019):
$71,261 × 1.75% × 6
$7,482.41
PV of 7,482.41 for 25 years at 7.5% (N = 25, I = 7.5, PMT = 7,482.41 Mode: End; PV = ?)
Present value of estimated future payments as of the start of retirement (keystrokes using a financial calculator):
$83,406
83,406/6
$13,901
Annual unit credit at time of retirement per service year:
2. Determination of build-up of pension obligation for the employee
Calculation for 2014
2014
Calculation for 2015
2015
0
Opening obligation
From close of 2014
$9,683
0
Interest cost at 7.5%
$9,683 x 0.075
$726
Current service cost
Present Value of the unit credit
$9,683
$10,409
Closing obligation
$20,818


can anyone explain this? is this going to be tested on exam?