Which of the Following Statements Regarding Contributions to Defined Contribution

question 43

Multiple Choice

Which of the following statements regarding contributions to defined contribution plans is true?

• A)Employer contributions to a defined contribution plan are not limited by the tax law.
• B)Employee contributions to a defined contribution plan are not limited by the tax law.
• C)An employee who is at least 60 years of age as of the end of the year may contribute more to a defined contribution plan than an employee who has not reached age 60 by year-end.
• D)The tax laws limit the sum of the employer and employee contributions to a defined contribution plan.

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Definitions:

Discounted Cash Flow

A valuation method used to estimate the value of an investment based on its expected future cash flows, adjusted for the time value of money.

Initial Investment

Initial investment refers to the amount of money initially laid out for an investment project or venture.

Profitability Index

The present value of a project’s cash inflows divided by the investment required.

Discount Rate

The interest rate used in discounted cash flow analysis to determine the present value of future cash flows.