Question 1

Which of the following is not true regarding defined contribution pension plans?

Accepted Answer

A)  Employees make regular contributions to the plan. 
B)  Employers make regular contributions to the plan. 
C)  The employer bears all of the investment risk. 
D)  Benefits are directly related to the earnings of the funds investments. 
E)  The number of defined contribution plans is increasing. 
A)  Employees make regular contributions to the plan. 
B)  Employers make regular contributions to the plan. 
C)  The employer bears all of the investment risk. 
D)  Benefits are directly related to the earnings of the funds investments. 
E)  The number of defined contribution plans is increasing. C

Question 2

Endowment funds

Accepted Answer

A)  Are formed from the contributions to charitable and educational institutions. 
B)  Are attractive investments for individuals with low liquidity needs. 
C)  Usually have very short investment horizons. 
D)  Provide retirement benefits for public employees. 
E)  Provide death benefits for its contributor's survivors. 
A)  Are formed from the contributions to charitable and educational institutions. 
B)  Are attractive investments for individuals with low liquidity needs. 
C)  Usually have very short investment horizons. 
D)  Provide retirement benefits for public employees. 
E)  Provide death benefits for its contributor's survivors. A

Question 3

Cash flows for nonlife insurance companies,such as property and casualty,are similar to cash flows of life insurance companies.

Accepted Answer

A) True 
 B)False  False

Question 4

Banks must compete for funds (savings deposits,CD's,etc.)in order to make loans and other types of investments.

Accepted Answer

A) True 
 B)False

Question 5

The retirement plan that promises to pay a specific benefit to its beneficiaries is

Accepted Answer

A)  A defined contribution plan. 
B)  A defined benefit pension plan. 
C)  A non-contribution pension plan. 
D)  An actuarial pension plan. 
E)  Supplemental Retirement Account (SR
A) . 
A)  A defined contribution plan. 
B)  A defined benefit pension plan. 
C)  A non-contribution pension plan. 
D)  An actuarial pension plan. 
E)  Supplemental Retirement Account (SR
A) .

Question 6

____ are investment specialists that are responsible for managing the investments of others.There are often legal standards against which they must abide in the performance of their duties.

Accepted Answer

A)  Underwriters 
B)  Investments bankers 
C)  Fiduciaries 
D)  Account executives 
E)  Trust officers 
A)  Underwriters 
B)  Investments bankers 
C)  Fiduciaries 
D)  Account executives 
E)  Trust officers

Question 7

Defined contribution pension plans promise to pay retirees a specific income stream after retirement.

Accepted Answer

A) True 
 B)False

Question 8

Which of the following statements concerning defined benefit plans is false?

Accepted Answer

A)  The company bears the risk of investments 
B)  Employees are entitled to either a lump-sum payment or income stream at retirement 
C)  Risk tolerance depends on funding status and its actuarial rate 
D)  Defined benefit plans for young workers are typically more conservatively invested than defined contribution plans 
E)  All of the above are true statements 
A)  The company bears the risk of investments 
B)  Employees are entitled to either a lump-sum payment or income stream at retirement 
C)  Risk tolerance depends on funding status and its actuarial rate 
D)  Defined benefit plans for young workers are typically more conservatively invested than defined contribution plans 
E)  All of the above are true statements

Question 9

Banks typically have short-term investment horizons because

Accepted Answer

A)  They have a strong need for liquidity. 
B)  They offer short-term deposit accounts. 
C)  They are required to by federal and state laws. 
D)  Choices a and b 
E)  All of the above 
A)  They have a strong need for liquidity. 
B)  They offer short-term deposit accounts. 
C)  They are required to by federal and state laws. 
D)  Choices a and b 
E)  All of the above

Question 10

Banks face regulatory constraints at both the state and federal level.

Accepted Answer

A) True 
 B)False

Question 11

Banks have high liquidity needs and therefore,have a short time horizon.

Accepted Answer

A) True 
 B)False

Question 12

Banks typically

Accepted Answer

A)  Have low liquidity needs. 
B)  Face very few federal and state regulatory constraints. 
C)  Don't have to compete for funds. 
D)  Have high liquidity needs and a short time horizons constraint. 
E)  Low investment risk. 
A)  Have low liquidity needs. 
B)  Face very few federal and state regulatory constraints. 
C)  Don't have to compete for funds. 
D)  Have high liquidity needs and a short time horizons constraint. 
E)  Low investment risk.

Question 13

Non-life insurance companies have somewhat unpredictable cash outflows and are therefore faced with different investment constraints than life insurance companies.

Accepted Answer

A) True 
 B)False

Question 14

Many endowments are tax-exempt.

Accepted Answer

A) True 
 B)False

Question 15

In a defined contribution pension plan,

Accepted Answer

A)  The plan does not promise to pay the retiree a specific income stream after retirement. 
B)  The plan does promise to pay the retiree a specific income stream after retirement. 
C)  The employee's retirement income is not an obligation of the firm. 
D)  The company carries the risk of paying future pension benefits to retirees. 
E)  Choices a and c 
A)  The plan does not promise to pay the retiree a specific income stream after retirement. 
B)  The plan does promise to pay the retiree a specific income stream after retirement. 
C)  The employee's retirement income is not an obligation of the firm. 
D)  The company carries the risk of paying future pension benefits to retirees. 
E)  Choices a and c

Exam 27: Investment and Retirement Plans

Which of the following is not true regarding defined contribution pension plans?

Endowment funds

Cash flows for nonlife insurance companies,such as property and casualty,are similar to cash flows of life insurance companies.

Banks must compete for funds (savings deposits,CD's,etc.)in order to make loans and other types of investments.

The retirement plan that promises to pay a specific benefit to its beneficiaries is

____ are investment specialists that are responsible for managing the investments of others.There are often legal standards against which they must abide in the performance of their duties.

Defined contribution pension plans promise to pay retirees a specific income stream after retirement.

Which of the following statements concerning defined benefit plans is false?

Banks typically have short-term investment horizons because

Banks face regulatory constraints at both the state and federal level.

Banks have high liquidity needs and therefore,have a short time horizon.

Banks typically

Non-life insurance companies have somewhat unpredictable cash outflows and are therefore faced with different investment constraints than life insurance companies.

Many endowments are tax-exempt.

In a defined contribution pension plan,

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The Asset Allocation Decision

The Global Market Investment Decision

Securities Markets: Organization and Operation

Security-Market Indexes

Efficient Capital Markets

An Introduction to Portfolio Management

An Introduction to Asset Pricing Models

Multifactor Models of Risk and Return

Analysis of Financial Statements

Security Valuation Principles

Macroanalysis and Microvaluation of the Stock Market

Industry Analysis

Company Analysis and Stock Valuation

Equity Portfolio Management Stragtegies

Technical Analysis

Bond Fundamentals

The Analysis and Valuation of Bonds

Bond Portfolio Management Strategies

An Introduction to Derivative Markets and Securities

Forward and Futures Contracts

Option Contracts

Swap Contracts,convertible Securities,and Other Embedded Derivatives

Professional Money Management, alternative Assets, and Industry Ethics

Evaluation of Portfolio Performance

Investment Return and Risk Analysis Questions

Calculating Covariance and Correlation Coefficient of Assets

Portfolio Variance and Stock Weight Calculations

Portfolio Optimization with Negative Correlation: Finding Minimum Variance and Weight Allocation

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