A Defined Benefits Plan

question 23

Multiple Choice

A defined benefits plan

• A)is always fully funded.
• B)may be underfunded but cannot be overfunded.
• C)may be overfunded but cannot be underfunded.
• D)may be either underfunded or overfunded.

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Definitions:

Annual Payment

The amount of money that is paid once every year, either as an obligation, such as a loan repayment, or as part of a periodic agreement.

Installment Loan

A type of loan that is repaid over time with a set number of scheduled payments.

Annual Interest

The amount of interest paid or earned over a one-year period.

Present Value

The current value of a future amount of money or stream of cash flows, given a specified rate of return.