Which of the Following Statements About Defined Contribution Plans Is

question 6

Multiple Choice

Which of the following statements about defined contribution plans is incorrect?

• A) In general, employees can choose the investment vehicle under a defined contribution plan.Thus, highly risk-averse employees can choose low-risk investments, while more risk-tolerant employees can choose high-risk investments.
• B) In a defined contribution plan, the employer must make larger-than-average contributions to the pension plan when investment returns have been below expectations.
• C) Defined benefit plans are used more often by large corporations than by small companies.
• D) The PBGC insures a portion of pension benefits.
• E) A defined contribution plan places the risk of poor pension portfolio performance on the employee.

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Definitions:

M2 Measure

A broad measure of money supply that includes cash, checking deposits, savings deposits, money market securities, mutual funds, and other time deposits.

Risk-Free Return

The theoretical return on an investment with zero risk, often associated with government bonds or treasury bills.

Jensen Measure

A performance metric that evaluates a portfolio manager's ability to generate excess returns relative to a benchmark, adjusting for risk.

Risk-Free Return

The return on an investment with zero risk, typically associated with U.S. Treasury securities.