1

1. In a defined contribution pension plan,

   if the funds in the pension plan exceed the amount promised, the excess accrues to the issuing firm or institution.

   all earnings are taxable as regular income.

   the employee is promised an assigned benefit based on earnings and years of service.

   pension income varies depending on how well the plan's investments have done.

0.5 points

QUESTION 2

1. Vesting refers to

   the shielding of returns on whole life policies from taxation.

   the payments made by an employee into a pension plan.

   the length of service required of an employee before he or she is eligible for a pension.

   the right of the holder of an insurance policy to collect for an insurable event.

0.5 points

QUESTION 3

1. Which of the following is when an investment bank purchases securities outright in case it misjudged the state of the market and it may have to sell the securities at a lower price than what was guaranteed?

   default risk

   principal risk

   credit risk

   liquidity risk

0.5 points

QUESTION 4

1. Which of the following rules affected hedge funds as a result of the Dodd-Frank Act of 2010?

   Carried interest is taxed as ordinary income.

   Large hedge funds must register with the SEC.

   Investors are allowed to make withdrawals after the first week.

   Hedge funds have to make detailed disclosure of their asset holdings.

0.5 points

QUESTION 5

1. The risk that the party on the other side of a financial transaction fails to meet its obligation is called

   counterparty risk.

   credit risk.

   currency risk.

   leverage.

0.5 points

QUESTION 6

1. The development of new financial securities or investment strategies using sophisticated models is known as

   underwriting.

   financial engineering.

   factoring.

   hedging.