Which of the Following Is True of 401(k)plans

question 47

Multiple Choice

Which of the following is true of 401(k) plans?

• A) They refer to the leave policies which make no distinction between sick,vacation,and personal days and allow employees a set number of days off each year.
• B) They are compensation plans which take no more than 3 percent of the annual personnel budget.
• C) They allow the employee to have no control over the amount of their contribution and how the money is invested.
• D) They are typically easier to administer and are less expensive than traditional pension plans.

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Definitions:

Independent Projects

Projects that are evaluated for investment purposes, where the acceptance of one project does not affect the decision to undertake another.

IRR

A financial metric, the Internal Rate of Return, is applied to estimate the profitability prospects of potential investments.

AAR

Average Annual Return, representing the average amount of money earned by an investment each year over a given time period.

Discounted Payback

A capital budgeting method that calculates the time needed to recoup the initial investment in present value terms, considering the time value of money.