A defined benefit plan has 100 employees with a majority of them over age 40. The pension fund manager has collected the following data: Risk-free rate 2.50% S&P 500 return (5-year average) 9.87% Expected inflation rate 2.10% Discount rate used to compute pension obligation 5.95% Yield to maturity on the company 20-year bonds 6.28% The return objective for the pension fund is closest to:
A defined benefit plan has 100 employees with a majority of them over age 40. The pension fund manager has collected the following data: Risk-free rate 2.50% S&P 500 return (5-year average) 9.87% Expected inflation rate 2.10% Discount rate used to compute pension obligation 5.95% Yield to maturity on the company 20-year bonds 6.28% The return objective for the pension fund is closest to:
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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A defined benefit plan has 100 employees with a majority of them over age 40. The pension fund manager has collected the following data:
Risk-free rate 2.50%
S&P 500 return (5-year average) 9.87%
Expected inflation rate 2.10%
Discount rate used to compute pension obligation 5.95%
Yield to maturity on the company 20-year bonds 6.28%
The return objective for the pension fund is closest to:
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