Question
Category:
Finance
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Estimated Rate of Return and Underfunding Explain how some government defined-benefit plans have become underfunded as a result of overestimating their rate of return on investment.
Editor July 20, 2021 21:41
Verified Answer Government defined-benefit plans usually set aside contributions per pay period from each of its participants. These government agencies often assume earning a very high rate of return on (View full solution)
Category:
Finance
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Exposure of Pension Funds to Interest Rate Risk Why might pension funds be exposed to interest rate risk? How can pension funds reduce their exposure to interest rate risk?
Editor July 20, 2021 21:38
Explanation There are various strategies to hedge the risk associated with the pension fund portfolio. If the portfolio managers believe that the funds may experience a risk over the next (View full solution)
Category:
Finance
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PBGC What is the main purpose of the Pension Benefit Guarantee Corporation (PBGC)?
Editor July 20, 2021 21:36
Explanation PBGC is not supported by the government in spite of being a federal charter. It is rather funded by; The annual premiums of the corporations that sponsor private pension (View full solution)
Category:
Finance
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Management of Pension Portfolios Explain the general difference in the composition of pension portfolios managed by trusts versus those managed by insurance companies. Why does this difference occur?
Editor July 20, 2021 21:35
Verified Answer Pension funds are managed by both the insurance companies and the trust departments of the commercial banks. The portfolio of the pension funds is very different in the (View full solution)
Category:
Finance
Verified Textbook Solution:
Guidelines for a Trust What type of general guidelines may be specified for a trust that is managing a pension fund?
Editor July 20, 2021 21:29
Explanation Trust departments of various financial institutions often manage pension funds. They invest the pension funds on the behalf of the employees who receive the benefit upon retirement. They are (View full solution)
