a) Identify and justify which investment policy statement X or Y, contains the appropriate language for each of the following components of Worden's pension plan.

i) Return Requirement

ii) Risk Tolerance

iii) Time Horizon

iv) Liquidity

b) Comment on any two critical areas that the policy should address with justification.

Q#1. Based in Atlanta, Worden Technology Inc., is an established company with operation in several countries. The firm has $16 billion in total assets and offers its employees a defined- benefit pension plan. Worden's pension plan currently has assets of $8.88 billion and liabilities of $9.85 billion. The plan's goals include achieving a minimum expected return of 8.4% with expected standard deviation of return no greater than 16.00 percent. Next month, Worden will reduce the retirement age requirement for full benefits from 65 years to 60 years. The median age of Worden workforce is 50 years. IPS X IPSY Return Plan's objective is to match Plan's objective is to outperform the relevant benchmark return by Requirement relevant benchmark return a substantial margin. Risk Tolerance Plan has a high risk tolerance Plan has a low risk tolerance because of the limited ability Because of the long-term nature of The plan and its liabilities to assume substantial risk Time Horizon Plan has a very long time horizon Plan has shorter time horizon Because of its infinite life. than in the past because of plan demographics. Plan has minimal liquidity needs. Liquidity Plan has moderate liquidity needs To fund monthly benefit payniant. Angus Williamson, CFA manages the pension plan's investment policy and strategic asset allocation decisions. He has heard an ongoing debate within Worden about the pension plan's investment policy statement (IPS). The table above compares two IPS's under consideration