Homework Answers
False.
When pension assets > pension liabilities, pension is overfunded and does not require making any additional contributions to the pension fund.
If pension liabilities > pension assets, pension is underfunded and requires additional contributions to be made by employer to fulfill their liabilities.
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When pension assets exceed liabilities employers are required to make additional contributions to the pension fund....
A pension fund has an average duration of its liabilities equal to 13 years. The fund...
A pension fund has an average duration of its liabilities equal
to 13 years. The fund is looking at 4-year maturity zero-coupon
bonds and 5% yield perpetuities to immunize its interest rate risk.
How much of its portfolio should it allocate to the zero-coupon
bonds to immunize if there are no other assets funding the
plan?
Questlon 1 (of 80) 1 A pension fund has an average duration of its liabilities equal to 13 years. The fund is looking at...
The interest cost included in the annual pension cost recorded by an employer sponsoring a defined benefit pension plan...
The interest cost included in the annual pension cost recorded by an employer sponsoring a defined benefit pension plan represents the a) difference between the expected and actual return on plan assets. b) increase in the defined benefit obligation due to the passage of time. c) increase in the fair value of plan assets due to the passage of time. d) interest earned on the plan assets for the year. An experience gain or loss (adjustment) is a) additional...
A pension fund has an average duration of its liabilities equal to 15 years. The fund...
A pension fund has an average duration of its liabilities equal to 15 years. The fund is looking at 5-year maturity zero-coupon bonds and 4% yield perpetuities to immunize its interest rate risk. How much of its portfolio should it allocate to the zero-coupon bonds to immunize if there are no other assets funding the plan? Write in percentages.
A pension fund has an average duration of its liabilities equal to 15 years. The fund...
A pension fund has an average duration of its liabilities equal to 15 years. The fund is looking at 5-year maturity zero-coupon bonds and 4% yield perpetuities to immunize its interest rate risk. How much of its portfolio should it allocate to the zero-coupon bonds to immunize if there are no other assets funding the plan? Write in percentages.
When the Pension Benefit Guaranty Corporation takes over an underfunded pension plan, if there aren’t enough...
When the Pension Benefit Guaranty Corporation takes over an underfunded pension plan, if there aren’t enough assets in the pension plan to pay the retirement obligations, then taxpayers will make up the difference. True False
You currently have pension fund assets of $15 million in a bond portfolio with a Macaulay...
You currently have pension fund assets of $15 million in a bond portfolio with a Macaulay duration of 10. Your liabilities are $2.7 million per year starting 30 years from today (i.e. at time 30) and lasting for 30 years (i.e. the last payment is at time 60). The yield curve is flat with spot rates constant at 4% for all maturities. (a) Compute the present value of your liabilities. Do you have enough assets to cover those liabilities? (b)...
The following data relate to Voltaire Company’s defined benefit pension plan: ($ in millions) Plan assets...
The following data relate to Voltaire Company’s defined benefit pension plan: ($ in millions) Plan assets at fair value, January 1 $ 730 Expected return on plan assets 73 Actual return on plan assets 58 Contributions to the pension fund (end of year) 126 Amortization of net loss 14 Pension benefits paid (end of year) 18 Pension expense 98 Required: Determine the amount of pension plan assets at fair value on December 31. (Enter your answers in millions. Amounts to...
Q1. Your firm decides to begin to fund a retirement pension for a new employee. The...
Q1. Your firm decides to begin to fund a retirement pension for a new employee. The details of the pension plan are as follows: The employee is 30 years old; the pension fund will begin to make annual payments to the employee 20 years from the date when funding for the pension begins. When payments begin, the employee will receive quarterly payment for 15 years. The first quarterly payment will be $ 20,000, and each succeeding payment will grow by...
When governmental entities provide defined benefit pension plans to governmental employees, a pension trust fund is...
When governmental entities provide defined benefit pension plans to governmental employees, a pension trust fund is used by the governmental entity that is acting as a trustee on behalf of current and future retirees to manage the funds at the "plan" level. The pension trust fund reports liabilities on its Statement of Fiduciary Net Position that primarily are related to pension benefits currently due to retired employees. The statement does not report a long-term liability for an unfunded portion, if...
When governmental entities provide defined benefit pension plans to governmental employees, a pension trust fund is...
When governmental entities provide defined benefit pension plans to governmental employees, a pension trust fund is used by the governmental entity that is acting as a trustee on behalf of current and future retirees to manage the funds at the "plan" level. The pension trust fund reports liabilities on its Statement of Fiduciary Net Position that primarily are related to pension benefits currently due to retired employees. The statement does not report a long-term liability for an unfunded portion, if...
A pension fund has an average duration of its liabilities equal
to 13 years. The fund is looking at 4-year maturity zero-coupon
bonds and 5% yield perpetuities to immunize its interest rate risk.
How much of its portfolio should it allocate to the zero-coupon
bonds to immunize if there are no other assets funding the
plan?
Questlon 1 (of 80) 1 A pension fund has an average duration of its liabilities equal to 13 years. The fund is looking at...
A pension fund has an average duration of its liabilities equal to 15 years. The fund is looking at 5-year maturity zero-coupon bonds and 4% yield perpetuities to immunize its interest rate risk. How much of its portfolio should it allocate to the zero-coupon bonds to immunize if there are no other assets funding the plan? Write in percentages.
A pension fund has an average duration of its liabilities equal to 15 years. The fund is looking at 5-year maturity zero-coupon bonds and 4% yield perpetuities to immunize its interest rate risk. How much of its portfolio should it allocate to the zero-coupon bonds to immunize if there are no other assets funding the plan? Write in percentages.
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