CEBS RPA 2 STUDYS CORRECT ALL QUESTIONS
AND ANSWERS RATED A+
✔✔Dedication, immunization, and contingent immunization - ✔✔This technique
attempts to construct a bond portfolio such that its cash flow can be used to fund
specific plan liabilities, such as to pay benefits to a group of retirees.
✔✔Employer responsibilities in DC plan investment provisions - ✔✔1. Structuring
appropriate investment programs
2. Selecting suitable investment managers
3. Monitoring investment performance
4. Communicating critical investment provisions to employees
✔✔Employee responsibilities in DC plan investment provisions - ✔✔deciding how to
invest their account balances
✔✔Benefits of a successful investment program for employer - ✔✔1. Low-cost fees
2. Ease of administration
3. Flexibility to make needed changes in investment arrangements
4. Improved recognition of the company as a source of valuable benefits.
✔✔Benefits of a successful investment program for employee - ✔✔1. Increased
participation
2. Improved returns
3. Lower costs.
✔✔Factors of enhanced investment opportunities in DC plans - ✔✔1. Growing public
awareness of the role of DC plans in providing economic security and of the importance
of saving and investing wisely
2. Increased recognition by employers of the need to provide flexibility of choice and
investment education
3. Improved and more efficient administrative capabilities
4. Aggressive marketing efforts of the leading mutual funds.
, ✔✔PPA provisions for pension plans - ✔✔PPA provisions provided protection and
advanced efforts to improve investment outcomes of DC plan participants that facilitate
a plan sponsor's ability to provide investment advice, require investment diversification
for DC plans and permit fiduciary exemption associated with automatic plan enrollment.
✔✔Employer considerations in DC plan investments - ✔✔1. Fiduciary responsibilities
2. The role of employer stock
3. Administrative issues.
✔✔Administrative issues in structuring investments provisions of a DC plan -
✔✔Frequency of valuation. Frequency of change. Default provisions. Negative
elections. Employee communications.
✔✔Section 404 c safe harbor provision - ✔✔require that employees must be permitted
to make changes at least quarterly, and more often for more volatile investment options.
✔✔Two components of return on an investment - ✔✔1. Yield
2. Capital gain or loss
✔✔Yield - ✔✔the periodic cash flows from the investment in the form of interest,
dividends or other such cash income
✔✔Capital gain or loss - ✔✔The change in value of the asset, either appreciation or
depreciation
✔✔Return Relative - ✔✔Return relative adds 1.0 to the total return in order that all
returns can be stated on the basis of 1.0 which represents no gain or loss, to avoid
negative numbers so the cumulative wealth index or the geometric mean can be
calculated
✔✔Cumulative wealth index - ✔✔measures the aggregate effect of returns over time
given some stated beginning amount
✔✔True average compound rate of growth - ✔✔the annual average rate at which an
invested dollar grew, taking into account the gains and losses over time
✔✔interest rate risk - ✔✔variability in a security's returns caused by changes in the
level of interest rates. affects bonds more directly than common stocks
✔✔market risk - ✔✔variability in returns caused by fluctuations in the overall market.
primarily affects common stocks. includes recessions, wars, structural changes in
economy, and change in consumer preferences
AND ANSWERS RATED A+
✔✔Dedication, immunization, and contingent immunization - ✔✔This technique
attempts to construct a bond portfolio such that its cash flow can be used to fund
specific plan liabilities, such as to pay benefits to a group of retirees.
✔✔Employer responsibilities in DC plan investment provisions - ✔✔1. Structuring
appropriate investment programs
2. Selecting suitable investment managers
3. Monitoring investment performance
4. Communicating critical investment provisions to employees
✔✔Employee responsibilities in DC plan investment provisions - ✔✔deciding how to
invest their account balances
✔✔Benefits of a successful investment program for employer - ✔✔1. Low-cost fees
2. Ease of administration
3. Flexibility to make needed changes in investment arrangements
4. Improved recognition of the company as a source of valuable benefits.
✔✔Benefits of a successful investment program for employee - ✔✔1. Increased
participation
2. Improved returns
3. Lower costs.
✔✔Factors of enhanced investment opportunities in DC plans - ✔✔1. Growing public
awareness of the role of DC plans in providing economic security and of the importance
of saving and investing wisely
2. Increased recognition by employers of the need to provide flexibility of choice and
investment education
3. Improved and more efficient administrative capabilities
4. Aggressive marketing efforts of the leading mutual funds.
, ✔✔PPA provisions for pension plans - ✔✔PPA provisions provided protection and
advanced efforts to improve investment outcomes of DC plan participants that facilitate
a plan sponsor's ability to provide investment advice, require investment diversification
for DC plans and permit fiduciary exemption associated with automatic plan enrollment.
✔✔Employer considerations in DC plan investments - ✔✔1. Fiduciary responsibilities
2. The role of employer stock
3. Administrative issues.
✔✔Administrative issues in structuring investments provisions of a DC plan -
✔✔Frequency of valuation. Frequency of change. Default provisions. Negative
elections. Employee communications.
✔✔Section 404 c safe harbor provision - ✔✔require that employees must be permitted
to make changes at least quarterly, and more often for more volatile investment options.
✔✔Two components of return on an investment - ✔✔1. Yield
2. Capital gain or loss
✔✔Yield - ✔✔the periodic cash flows from the investment in the form of interest,
dividends or other such cash income
✔✔Capital gain or loss - ✔✔The change in value of the asset, either appreciation or
depreciation
✔✔Return Relative - ✔✔Return relative adds 1.0 to the total return in order that all
returns can be stated on the basis of 1.0 which represents no gain or loss, to avoid
negative numbers so the cumulative wealth index or the geometric mean can be
calculated
✔✔Cumulative wealth index - ✔✔measures the aggregate effect of returns over time
given some stated beginning amount
✔✔True average compound rate of growth - ✔✔the annual average rate at which an
invested dollar grew, taking into account the gains and losses over time
✔✔interest rate risk - ✔✔variability in a security's returns caused by changes in the
level of interest rates. affects bonds more directly than common stocks
✔✔market risk - ✔✔variability in returns caused by fluctuations in the overall market.
primarily affects common stocks. includes recessions, wars, structural changes in
economy, and change in consumer preferences
