Which Statement Is Correct

question 10

Multiple Choice

Which statement is correct?

• A)The plan sponsor of a defined benefit plan never needs to increase its contributions to the pension trust.
• B)A defined contribution plan is a pension plan that places investment risk on the employers.
• C)Inadequate contributions to a defined benefit plan by the plan sponsor or poor investment returns will result in an underfunded pension.
• D)A defined contribution plan specifies the fixed benefits that future retirees will receive.

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Definitions:

Common Stock

A form of corporate equity ownership, representing a share of the company and typically carrying voting rights.

Cumulative Preferred Stock

A type of preferred stock where dividends that have not been paid in the past must be paid out to preferred shareholders before common shareholders can receive any dividends.

Par Common Stock

The face value of common stock as designated in the corporate charter, which is the minimum amount that shares can be issued for.

Total Dividend

The sum of all dividends paid out to shareholders for a specific period, representing the share of profits distributed.