A Fully-Funded Pension Plan Can Invest Surplus Assets in Equities

question 53

Multiple Choice

A fully-funded pension plan can invest surplus assets in equities provided it reduces the proportion in equities when the value of the fund drops near the accumulated benefit obligation. This strategy is referred to as

• A) immunization.
• B) hedging.
• C) diversification.
• D) contingent immunization.
• E) overfunding.

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Definitions:

Condensed Balance Sheets

A simplified financial statement showing the summary of a company's financial position, including assets, liabilities, and equity at a specific point in time.

Excess Consideration

The amount by which the price paid for an acquisition exceeds the total fair value of its identifiable net assets.

Noncurrent Assets

Assets not expected to be converted into cash, sold, or consumed within one year or the operating cycle, such as property, plant, and equipment.

Multiple Acquisitions

The process by which a company buys several companies in a short period, often to consolidate their industry or diversify.