Pension Fund Operations

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Question 1

Free

Multiple Choice

Pension funds whose contributions are dictated by the benefits that will eventually be provided are called ____ plans.

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defined-benefit

defined-contribution

beneficiary

guarantor-insured

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Question 2

Free

Multiple Choice

A pension plan that provides benefits that are determined by the accumulated contributions and return on the fund's investment performance is called a ____ plan.

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defined-benefit

defined-contribution

beneficiary

guarantor-insured

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Question 3

Free

Multiple Choice

A plan allows a firm to know with certainty the amount of funds to contribute. The plan allows a firm to know with certainty the amount of benefits that must be provided.

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defined-benefit; defined-benefit

defined-contribution; defined-contribution

defined-contribution; defined-benefit

defined-benefit; defined-contribution

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Question 4

Free

Multiple Choice

If pension fund investment decisions are made with the objective of generating cash flows at the same time as planned outflow payments, the fund follows a strategy. When comparing matchedfunding and projective funding, is more flexible for portfolio managers.

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matched funding; matched funding

projective funding; matched funding

projective funding; projective funding

matched funding; projective funding

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Question 5

Free

Multiple Choice

Pension funds managed by life insurance companies are normally referred to as

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trust portfolios.

insured plans.

matched plans.

projective plans.

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Question 6

Multiple Choice

The asset composition of private pension portfolios is most heavily concentrated in

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corporate bonds.

mortgages.

common stock.

money market securities.

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Question 7

Multiple Choice

Investing in a bond index portfolio is an example of a(n) approach. Investing in an equity portfolio that mirrors the stock market is an example of a(n) approach.

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passive; active

active; active

active; passive

passive; passive

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Question 8

Multiple Choice

Pension funds managed by life insurance companies concentrate on

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common stock.

bonds and mortgages.

preferred stock.

money market instruments.

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Question 9

Multiple Choice

To reduce interest rate risk, pension fund managers can

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shift from variable-rate to fixed-rate bonds.

increase the average maturity on fixed-rate bonds.

sell bond futures contracts.

reduce the investment in money market securities.

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Question 10

Multiple Choice

Most pension fund contributions are contributed by the

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employer.

employee.

state government.

federal government.

none of the above

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Question 11

True/False

Public pension funds can be classified by the manner in which contributions are received and benefits are paid.

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True

False

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Question 12

True/False

A defined-benefit plan provides benefits that are determined by the accumulated contributions and the fund's investment performance.

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True

False

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Question 13

True/False

In recent years, defined-contribution plans have commonly been replaced by defined-benefit plans.

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True

False

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Question 14

True/False

Projective funding limits the manager's discretion, allowing only investments that match future payouts.

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True

False

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Question 15

True/False

Taking speculative positions in stock options is generally not considered appropriate for retirement funds because of the high degree of risk involved.

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True

False

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Question 16

True/False

The composition of the stocks in a pension fund's portfolio is determined by the fund's portfolio managers.

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True

False

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Question 17

Multiple Choice

With a ____ funding strategy, investment decisions are made with the objective of generating cash flows that match planned outflow payments.

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matched

mixed

projective

none of the above

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Question 18

True/False

Underfunded pensions are primarily a problem with defined-contribution pension plans.

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True

False

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Question 19

Multiple Choice

The government agency that guarantees that participants in defined-benefit plans will receive their benefits upon retirement is the:

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Federal Pension Insurance Corporation.

Pension Benefit Guaranty Corporation.

Office of Pension Insurance.

Employee Pension Protection Bureau.

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Question 20

True/False

A pension fund manager might hedge against interest rate movements by selling bond futures contracts.

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True

False

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Pension Fund Operations

Pension funds whose contributions are dictated by the benefits that will eventually be provided are called ____ plans.

A pension plan that provides benefits that are determined by the accumulated contributions and return on the fund's investment performance is called a ____ plan.

A ____ plan allows a firm to know with certainty the amount of funds to contribute. The ____ plan allows a firm to know with certainty the amount of benefits that must be provided.

If pension fund investment decisions are made with the objective of generating cash flows at the same time as planned outflow payments, the fund follows a ____ strategy. When comparing matchedfunding and projective funding, ____ is more flexible for portfolio managers.

Pension funds managed by life insurance companies are normally referred to as

The asset composition of private pension portfolios is most heavily concentrated in

Investing in a bond index portfolio is an example of a(n) ____ approach. Investing in an equity portfolio that mirrors the stock market is an example of a(n) ____ approach.

Pension funds managed by life insurance companies concentrate on

To reduce interest rate risk, pension fund managers can

Most pension fund contributions are contributed by the

Public pension funds can be classified by the manner in which contributions are received and benefits are paid.

A defined-benefit plan provides benefits that are determined by the accumulated contributions and the fund's investment performance.

In recent years, defined-contribution plans have commonly been replaced by defined-benefit plans.

Projective funding limits the manager's discretion, allowing only investments that match future payouts.

Taking speculative positions in stock options is generally not considered appropriate for retirement funds because of the high degree of risk involved.

The composition of the stocks in a pension fund's portfolio is determined by the fund's portfolio managers.

With a ____ funding strategy, investment decisions are made with the objective of generating cash flows that match planned outflow payments.

Underfunded pensions are primarily a problem with defined-contribution pension plans.

The government agency that guarantees that participants in defined-benefit plans will receive their benefits upon retirement is the:

A pension fund manager might hedge against interest rate movements by selling bond futures contracts.

A plan allows a firm to know with certainty the amount of funds to contribute. The plan allows a firm to know with certainty the amount of benefits that must be provided.

If pension fund investment decisions are made with the objective of generating cash flows at the same time as planned outflow payments, the fund follows a strategy. When comparing matchedfunding and projective funding, is more flexible for portfolio managers.

Investing in a bond index portfolio is an example of a(n) approach. Investing in an equity portfolio that mirrors the stock market is an example of a(n) approach.