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SOA真题NovemberCourseV

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“吨吨吨”通过精心收集，向本站投稿了8篇SOA真题NovemberCourseV，以下是小编为大家准备的SOA真题NovemberCourseV，供大家参考借鉴，希望可以帮助到有需要的朋友。

篇1：SOA真题NovemberCourse8F

course 8: fall 2003 1 go to next page

finance

morning session

**beginning of examination**

finance

morning session

questions 1-5 pertain to the case study.

each question should be answered independently.

1. (8 points) mr. newman has just given j. peterman the unaudited line-of-business and

consolidated financials of nada for along with projections for 2003-. in

addition, nada has supplied peterman with an extensive business plan detailing the

growth potential and opportunity for each of its business units.

the business plan contains an emphasis on growing the gic business. mr. newman

plans to do this through the addition of funding agreements with 12-day put options.

the funding agreements will be sold to institutional investors other than retirement

plans.

peterman is concerned about nada’s growing reliance on gic sales. peterman has

questions about the profitability, liquidity, and investment risks of the gics.

mr. newman has asked you to address the rating agency’s concerns.

(a) explain why peterman may have concerns about increased funding agreement

sales and their effects on profitability, liquidity, and investment risk.

(b) peterman has recently adopted a view of interest rate risk similar to moody’s

investor service. summarize moody’s view of interest rate risk, and describe the

impact that such views could have on peterman’s evaluation of nada’s current

and planned gic business.

course 8: fall 2003 2 go to next page

finance

morning session

questions 1-5 pertain to the case study.

each question should be answered independently.

2. (10 points) in preparation for the upcoming rating agency meeting with j. peterman,

chief actuary kramer has been asked to look into improving the rbc ratio of the term

life block. his preference is to change the asset mix backing the product.

manzier reinsurance has offered to coinsure 35% of nada’s term life block.

(a) (1 point) calculate the required capital for year-end 2003 for the term life block

of business prior to any reinsurance. show your work.

(b) (2 points) propose terms for the reinsurance transaction with manzier that would

optimize nada’s rbc ratio for the term life block of business.

if the reinsurance deal you proposed is consummated. show your work.

(d) (2 points) calculate the impact of your proposed reinsurance arrangement on

nada’s year-end 2003 rbc ratio. assume no change to available surplus.

show your work.

(e) (2 points) predict manzier’s response to the terms of the reinsurance arrangement

proposed in part (b).

course 8: fall 2003 3 go to next page

finance

morning session

questions 1-5 pertain to the case study.

each question should be answered independently.

3. (12 points) nada’s business plan projects increased sales of gics beginning in 2003.

to achieve this plan, the marketing department has instituted a commission scale for

gic products sold in 2003, as follows:

•a commission payment of 1% of deposits for gics with 5-year interest rate

guarantees

•a commission payment of 0.2% of deposits for gics with 1-year interest rate

guarantees

•commissions are paid at the time of sale to the broker.

von nostrum has recommended that nada start deferring acquisition costs with respect

to its new business. elaine benes has put you in charge of creating a methodology to

capitalize and amortize acquisition costs in accordance with u.s. gaap.

you start by focusing on the gic line. assume the following:

•nada’s gics are fas 97 investment contracts.

•all gics are sold at the beginning of the year.

•there are no withdrawals prior to maturity.

•interest earned is paid to the contract holder on december 31 of each year.

•for assets backing the gic business sold in 2003, nada expects to earn an

investment return of 4.295%.

•expenses are 5 basis points per year.

(a) describe the procedure for determining the capitalization of the acquisition

expenses and the subsequent amortization of the dac asset for the gic line.

(b) calculate the dac asset for new business planned to be written in 2003 for the

gic line. show your work.

work.

course 8: fall 2003 4 go to next page

finance

morning session

篇2：SOA真题MayCourse6

course 6

morning session

section a – written answer

course 6: spring 2004 - 1 - go on to next page

morning session

**beginning of examination**

morning session

1. (4 points) outline the key characteristics of securities regulations and restrictions in

effect in the united states.

2. (6 points) you are given the following:

scenario 1 scenario 2 scenario 3

probability 45% 40% 15%

stock a return 30% 2% -10%

stock b return -8% 15% 5%

stock c return 8% 4% -10%

t-bills return 3% 3% 3%

an investor has:

•7,000 invested in stock a which he cannot sell

•a risk aversion of 4

•3,000 of additional funds to invest

(a) calculate the expected return and standard deviation of each available investment.

(b) the investor can invest the additional funds in only one investment.

(i) calculate the risk and reward of each investment strategy.

(ii) rank each of the investment strategies. explain your answer.

show all work.

course 6: spring 2004 - 2 - go on to next page

morning session

3. (9 points) you are given the following:

•two types of bonds are available with par values of 100:

(i) 5-year zero coupon callable bonds, callable at 80 after two years of call

protection

(ii) 10-year zero coupon putable bonds, putable to issuer at 40 after three years

(iii) market prices are given in the table below:

market date price

callable bond putable bond

december 31, 70 50

december 31, 2004 100 50

december 31, 2005 90 60

december 31, 70 60

•an investor’s strategy is:

(i) invest any proceeds received from callable bonds into putable bonds

(ii) invest any proceeds received from putable bonds into callable bonds

the investor’s initial investment on december 31, 2003 was split between one

callable bond and one putable bond. both bonds purchased had two years of

protection remaining at time of purchase.

december 31 of each year is the only day for purchasing, calling or putting bonds.

bonds are called or put whenever the opportunity arises.

today’s date is december 31, 2004.

(a) contrast put options with call options.

(b) describe the risks associated with the embedded options in the initial investment.

assume no transaction costs.

(d) contrast options with futures.

(e) describe how futures could be used to improve the holding period return.

show all work.

course 6: spring 2004 - 3 - go on to next page

morning session

4. (6 points) you are given the following information about three collateralized mortgage

obligations (cmos):

•cmo a is backed by 7.5% pass-throughs consisting of the following tranches:

•3-year sequential-pay

•5-year very accurately defined maturity (vadm)

•7-year sequential-pay

•10-year sequential-pay

•17-year z bond

•cmo b is backed by 7.5% pass-throughs consisting of the following tranches:

•3-year planned amortization classes (pac)

•7-year pac

•7-year companion

•10-year pac

•16-year pac

•20-year companion

•cmo c is backed by 7.5% pass-throughs consisting of the follo wing tranches:

•3-year sequential-pay

•7-year sequential-pay

•10-year sequential-pay

•17-year sequential-pay

u.s. federal authorities are expected to increase interest rates by 50 basis points.

describe how each structure will be affected by the increase.

course 6: spring 2004 - 4 - go on to next page

morning session

5. (8 points) you are given the following with respect to two public companies:

•the common shares of each company are currently trading at 30 as of

december 31, 2003

•neither company pays shareholder dividends

•there are no taxes or transaction costs

•an industry analyst has projected the possible stock prices over the next two

years as a function of the performance of the us economy:

us economy company a company b

2004 2005 december

31, 2004

december

31, 2005

december

31, 2004

december

31, 2005

expansion expansion 32 33 33 36

expansion recession 32 30 33 30

recession expansion 30 29 29 29

recession recession 30 30 29 27

(a) determine if the analyst’s projections allow for arbitrage.

(b) using the analyst’s projections, determine the value of a european put option on

company b’s stock if the option expires on december 31, 2005, and has an

exercise price of 30.

option with an exercise price of 31 on company a’s stock using a portfolio of the

two companies common shares.

show all work.

course 6: spring 2004 - 5 - go on to next page

morning session

篇3：SOA真题November2003Course5

course 5

morning session

application of basic actuarial principles

section a-written answer

course 5: fall 2003 - 2 - go on to next page

morning session

**beginning of examination 5**

morning session

1. (5 points) a large employer is considering offering a private pension plan.

(a) describe the reasons for offering such a plan.

(b) describe the process involved in designing and implementing such a plan.

2. (5 points)

(a) for basic group term life insurance, briefly describe each of the following items:

(i) typical plan designs offered

(ii) eligibility provisions

(iii) continuity of coverage provisions

(b) briefly describe how supplemental group term life insurance is different from

basic group term life insurance with respect to:

(i) typical plan designs offered

(ii) eligibility provisions

(iii) continuity of coverage provisions

course 5: fall 2003 - 3 - go on to next page

morning session

3. (5 points)

(a) describe the reasons a life insurance company may reinsure its risk.

(b) abc life insurance company has a 40% quota share reinsurance treaty on a first

dollar basis. its retention limit is $500,000 per policy.

policy 1 policy 2

net amount at risk $750,000 x

amount retained r y

amount reinsured on a first dollar basis s z

amount reinsured on an excess basis t $100,000

calculate the missing values in the table above.

show all work.

4. (5 points) explain the u.s. laws and regulations with respect to market conduct that

apply to a life insurance company and its agents.

5. (6 points) mary and john, respectively 45 and 42 years old, are considering the purchase

of a non-participating whole life, joint last-to-die policy, paid-up at first death with:

•a 5 year term individual rider life insurance convertible and renewable up

to age 65 for mary and john;

•a critical illness rider covering 50 illnesses for mary and john;

•a disability income rider providing a lifetime benefit with a 2 week

waiting period for mary and john.

(a) describe briefly the policy and its riders.

(b) describe alternatives to each coverage that could reduce the cost to mary and

john.

course 5: fall 2003 - 4 - go on to next page

morning session

6. (7 points) for a defined benefit pension plan, you are given:

pension plan formula:

1.5% of final year’s salary for each year of service up to 10 years, plus

2.0% of final year’s salary for each year of service after 10 years.

interest rate 6%

salary growth rate 4%

pre-retirement decrements none

assumed retirement age 65

12

a&&65 12

assets at 1/1/2003 300,000

assets at 1/1/ 320,000

contribution made on 12/31/2003 5,000

funding method projected unit credit

employee age at hire age on 1/1/2003 salary on 1/1/2003

a 30 40 30,000

b 30 60 50,000

(a) calculate the unfunded accrued liability at 1/1/2003.

(b) the actual accrued liability on 1/1/2004 is 350,000.

calculate the total experience gain/loss as of that date.

show all work.

course 5: fall 2003 - 5 - go on to next page

morning session

7. (5 points) for a property and casualty insurance policy issued january 1, , you are

given:

effective date rate change

may 1, 2000 +5%

november 1, 2000 +10%

calendar year

earned premium

expected effective incurred losses, trended

and developed through december 31,

2000 120,000 100,000

130,000 110,000

2002 140,000 120,000

expense ratio: 30%

present average manual rate: 45

assume all policies have a one-year term and the premium is uniformly

distributed.

calculate the indicated average gross rate as of january 1, 2003.

show all work.

篇4：SOA真题November2004Course8RU

course 8: fall 2004 - 1 - go to next page

retirement benefits,

comprehensive segment – u.s.

morning session

**beginning of examination 8**

comprehensive segment – u.s.

morning session

1. (9 points) a pension committee member at your u.s. based client believes that the

interest rate for the defined benefit plan valuations is too low. he supports his view by

stating that a higher interest rate would lower the cost of the plan. a second committee

member argued against raising the assumption.

the chairman of the pension committee has asked you to lead a discussion at the next

pension committee meeting regarding the interest rate assumptions for funding purposes

and for accounting purposes, and their effect on the interested parties.

outline your discussion.

course 8: fall 2004 - 2 - go to next page

retirement benefits,

comprehensive segment – u.s.

morning session

questions 2 – 6 pertain to the case study

2. (12 points) the cfo of noc has decided to take a more active role in managing noc’s

pension plan assets. in reviewing the performance of the national oil full-time hourly

union pension plan, he is disturbed by the recent absolute performance. he proposes

that the assets should be moved to 100% domestic fixed income because that asset class

has outperformed the other asset classes in 2 of the last 3 years.

you are given:

calendar year rf rm β

4% 21% 0.9

2002 5% -5% 0.85

2001 4% 1% 0.8

additional information for 2003

target portfolio mix

for 2003 benchmark return in

2003

domestic large cap

equities

35% 30%

domestic small cap

equities

25% 47%

domestic fixed income 25% 4%

international equities 10% 39%

real estate 5% 9%

cash 0% 1%

(a) describe the features in a statement of investment policies and procedures that

could help the cfo in his evaluation of the plan’s performance.

(b) calculate the 2001, 2002 & 2003 risk adjusted rate of return for the fund.

(d) evaluate the investment performance of the fund during 2003.

(e) critique the cfo’s proposal.

course 8: fall 2004 - 3 - go to next page

retirement benefits,

comprehensive segment – u.s.

morning session

questions 2 – 6 pertain to the case study

3. (8 points) the government of vosne is concerned that workers are harmed by switching

companies periodically throughout their careers. the government has asked for your

assistance in understanding this issue.

(a) describe the implications of switching employers on workers’ retirement benefits.

(b) suggest policies that could be adopted by the government of vosne to improve

the portability of private retirement benefits.

(d) describe the impact of these policies on noc.

4. (10 points) auditors in vosne have criticized its current pension accounting standards as

being misleading to readers of financial statements and contrary to the teachings of

financial economics.

the department of accounting standards is considering changes to the current

accounting rules to achieve the following goals:

• increased transparency;

• improved consistency with how financial economics measures “risk”; and

• more practical and usable information for financial statement readers.

(a) critique the current accounting rules in light of the department’s goals.

(b) recommend changes to the accounting rules to meet the department’s goals.

course 8: fall 2004 - 4 - go to next page

retirement benefits,

comprehensive segment – u.s.

morning session

questions 2 – 6 pertain to the case study

篇5：SOA真题NovemberCourse8V

course 8: investment - 1 - go on to next page

november

morning session

november 2000

course 8v

society of actuaries

course 8: investment - 2 - go on to next page

november 2000

morning session

** beginning of examination **

morning session

questions 1 – 3 pertain to the case study.

each question should be answered independently.

1. (10 points) the board of directors of lifeco was recently given a presentation on the

paper by robert van der meer and meye smink, strategies and techniques for asset-

liability management: an overview. as the newly appointed chief risk officer for

lifeco, the board has asked you to give a presentation.

(a) categorize and describe the alm strategies and techniques employed by lifeco

within the framework provided by van der meer and smink.

(b) assess the relative merits or return-driven versus value-driven strategies for

lifeco.

van der meer and smink) that reduces the total company exposure to interest rate

risk and provides an opportunity to increase company surplus.

(d) evaluate your proposed strategy using the criteria set out in the paper by

van der meer and smink.

course 8: investment - 3 - go on to next page

november 2000

morning session

questions 1 – 3 pertain to the case study.

each question should be answered independently.

2. (9 points) lifeco management wants to segment the group line of business for

asset/liability management purposes into:

(i) long term disability (ltd), and

(ii) other a&h.

the newly allocated balance sheet for ltd is shown below:

present value modified duration adjusted duration

assets 550.9 13.5 11.00

liabilities 532.0 8.1 5.37

economic value 18.9 169.47

the relative volatility of assets for other a&h is the same as for ltd. the relative

volatility of liabilities for other a&h is 1.

(a) construct the new other a&h allocated balance sheet.

(b) assess the limitations of only using the above measures in managing interest rate

risk.

manage its exposure to interest rate risk.

(d) the portfolio manager for the group line of business argues that franchise value

should be considered in the liability target duration calculation. define franchise

value.

(e) explain the implications of using franchise value for determining target

durations.

course 8: investment - 4 - go on to next page

november 2000

morning session

questions 1 – 3 pertain to the case study.

each question should be answered independently.

3. (22 points) lifeco wants to establish a delta/gamma/vega/rho hedge on the equity

exposure of their variable annuity business, using positions in some or all of the

following assets.

asset price delta gamma vega rho

s&p 500 future 0 100 0 0 0

30-year treasury

bond future

0 0 0 0 -12,598

1-year put 51.98 -0.34608 0.00184 3.688 -3.98

1-year call 109.45 0.65392 0.00184 3.688 5.45

10-year put 42.88 -0.10529 0.00029 5.761 -14.82

10-year call 489.57 0.89472 0.00029 5.761 40.51

lifeco’s liabilities have the following sensitivities:

delta – 2,659.90

gamma 1.036

vega 1952

rho – 101,910,000

all deltas and gammas are per unit change in the s&p 500 index.

vegas are per 1% change in volatility

rhos are per 1% change in interest rates

current value of the s&p 500 is 1300

(a) (6 points) construct a hedge position using the above assets that minimizes the

cost of the hedge without regard to the operational guidelines.

(b) (1 point)

(i) assess whether the hedge determined in part (a) would be in violation of the

operational guidelines for use of derivatives.

(ii) recommend any necessary changes to the guidelines.

course 8: investment - 5 - go on to next page

november 2000

morning session

篇6：SOA真题NovemberCourseV

course 8: fall 2004 -1- go on to next page

investment

morning session

**beginning of examination**

investment

morning session

questions 1-4 pertain to the case study

1. (5 points) lifeco’s alm report indicates a need to rebalance the assets supporting the

non-traditional life segment.

(a) describe the constraints on asset sales when rebalancing this portfolio.

(b) evaluate lifeco’s investment strategy for this segment, and recommend any

necessary changes.

course 8: fall 2004 -2- go on to next page

investment

morning session

questions 1-4 pertain to the case study

2. (9 points) lifeco is considering selling its closed block of institutional pension (gic).

liability book value (in $ millions) $1,500

maturity (in years) 2

annual liability crediting rate 6.60%

1 year risk-free rate 1%

you are given the following information:

scenario 1 scenario 2

1 year risk-free rate 1 year forward 3% 2%

withdrawal rate at the end of year 1 4% 2%

withdrawal rate at the end of year 2 100% 100%

probability 30% 70%

there are no new deposits.

(a) (4 points) compare the option pricing method and the actuarial appraisal method

for estimating the fair value of liabilities.

(b) (2 points) outline practical considerations in applying the option pricing method.

with the risk- free interest rate for discounting.

course 8: fall 2004 -3- go on to next page

investment

morning session

questions 1-4 pertain to the case study

3. (9 points) you are lifeco’s investment actuary and a member of the alm committee.

the committee is currently reviewing the risk exposures of the non-traditional life

portfolio as contained in your december 31 alm report.

•you have recently switched lifeco’s alm reporting to effective duration

from modified duration

•your effective duration calculations use a base yield curve and a yield

curve shocked by 1 basis point

•no explicit hedge has been set up for the minimum credited interest

guarantees

•lifeco’s head of investments has proposed the sale of $50 million (in

present value) of 15-year zero-coupon bonds in order to increase cash

holdings to partially address the key rate duration mismatch

(a) describe the limitations of lifeco’s reported effective durations as an interest rate

risk measure.

(b) estimate the economic impact of a 100bp drop in interest rates based on your

reported effective durations.

explain reasons for any differences to the alm committee.

(d) describe any interest rate ‘bets’ evident from the reported partial durations.

(e) estimate the revised partial durations following this proposed transaction.

(f) estimate the revised impact of margin squeeze following this proposed

transaction.

(g) explain how the potential margin squeeze should be incorporated into any

assessment of interest rate bets.

course 8: fall 2004 -4- go on to next page

investment

morning session

questions 1-4 pertain to the case study

篇7：SOA真题NovemberCourse8RU

course 8: fall 2003 -1- go to next page

retirement benefits,

comprehensive segment – u.s.

morning session

society of actuaries course 8ru fall 2003

**beginning of examination 8**

comprehensive segment – u.s.

morning session

all questions pertain to the case study

1. (7 points) a noc executive with 30 years of service plans to retire one year from now at

age 62. it is important to noc that the executive transitions to retirement over the next

four years.

(a) describe the benefit incentives that can be offered to help retain this executive.

(b) if you were hired by this executive, provide your recommendation regarding the

negotiation of benefits.

years of service with noc.

(d) identify the additional considerations that would exist if, instead of being hired by

the executive, you were hired by noc to provide advice to the executive.

course 8: fall 2003 -2- go to next page

retirement benefits,

comprehensive segment – u.s.

morning session

all questions pertain to the case study

2. (11 points) on june 30, 2003, noc purchased a non-participating annuity contract to

cover the obligations of all the pensioners in the full-time hourly union pension plan.

you are given:

•the contract cost was $125 million.

•as of june 30, 2003, noc has recorded half of its 2003 pension expense and

contributed half of its 2003 contribution.

•a discount rate of 6.0% was appropriate on june 30, 2003.

•valuation results as of june 30, 2003, immediately before the annuity purchase:

using a 6.5%

discount rate

using a 6.0%

discount rate

(all dollars in 000’s)

pbo

active participants $377,000 $400,000

deferred vested participants 0 0

pensioners 103,000 108,000

total pbo $480,000 $508,000

service cost $24,000 $28,000

market value of assets $320,000 $320,000

average remaining service period 11.5 11.5

(a) (5 points) calculate the pension expense for the year 2003. show all work.

(b) (1 point) describe the additional considerations if a participating annuity contract

were purchased.

rationale for the different requirements.

(d) (2 points) describe the information noc will have to provide the insurer for the

purpose of obtaining a quote for the annuity contract.

course 8: fall 2003 -3- go to next page

retirement benefits,

comprehensive segment – u.s.

morning session

all questions pertain to the case study

3. (6 points) noc’s board of directors has established the following funding policy for

noc’s db erps: annual contributions equal to normal cost plus five-year amortization

of unfunded actuarial accrued liability. the cfo of noc is concerned about the

volatility of funding policy contributions.

(a) explain the effects of different asset valuation methods on this volatility.

(b) explain the effects of different asset class allocations on this volatility.

course 8: fall 2003 -4- go to next page

retirement benefits,

comprehensive segment – u.s.

morning session

all questions pertain to the case study

4. (12 points) the law in vosne has been changed to permit voluntary employee

contributions of up to 5% of pay to a dc erp. the tax treatment of these contributions

is the same as for contributions to a ppa.

noc has decided to change the full- time hourly union pension plan from a flat dollar

plan to a final average earnings plan, and to add a dc erp for the union employees.

the main provisions of the new plans are:

db erp

normal retirement benefit: 1% of final five-year average earnings

times years of service

post retirement indexing: 3% per year

optional form of benefit: lump sum

the other provisions of the plan are the same as those in the noc full-time hourly

union pension plan.

dc erp

employee contributions: voluntary

matching employer contributions: 100% match on the first 3% of employee

contributions

form of benefit: lump sum or periodic pension

(a) critique the design of the new plans from the perspective of noc.

(b) critique the design of the new plans from the perspective of the hourly union

employees.

(d) describe the considerations in setting investment options to be offered to

participants in the dc erp.

(e) predict the socio-economic effects of the change in the law in vosne.

course 8: fall 2003 -5- go to next page

retirement benefits,

comprehensive segment – u.s.

morning session

all questions pertain to the case study

篇8：SOA真题NovemberCourse8RC

course 8: fall 2003 -1- go to next page

retirement benefits,

comprehensive segment – canada

morning session

society of actuaries course 8rc fall 2003

**beginning of examination 8**

comprehensive segment – canada

morning session

all questions pertain to the case study

1. (7 points) a noc executive with 30 years of service plans to retire one year from now at

age 62. it is important to noc that the executive transitions to retirement over the next

four years.

(a) describe the benefit incentives that can be offered to help retain this executive.

(b) if you were hired by this executive, provide your recommendation regarding the

negotiation of benefits.

years of service with noc.

(d) identify the additional considerations that would exist if, instead of being hired by

the executive, you were hired by noc to provide advice to the executive.

course 8: fall 2003 -2- go to next page

retirement benefits,

comprehensive segment – canada

morning session

all questions pertain to the case study

2. (11 points) on june 30, 2003, noc purchased a non-participating annuity contract to

cover the obligations of all the pensioners in the full-time hourly union pension plan.

you are given:

•the contract cost was $125 million.

•as of june 30, 2003, noc has recorded half of its 2003 pension expense and

contributed half of its 2003 contribution.

•a discount rate of 6.0% was appropriate on june 30, 2003.

•valuation results as of june 30, 2003, immediately before the annuity purchase:

using a 6.5%

discount rate

using a 6.0%

discount rate

(all dollars in 000’s)

abo

active participants $377,000 $400,000

deferred vested participants 0 0

pensioners 103,000 108,000

total abo $480,000 $508,000

service cost $24,000 $28,000

market value of assets $320,000 $320,000

average remaining service period 11.5 11.5

(a) (5 points) calculate the pension expense for the year 2003. show all work.

(b) (1 point) describe the additional considerations if a participating annuity contract

were purchased.

rationale for the different requirements.

(d) (2 points) describe the information noc will have to provide the insurer for the

purpose of obtaining a quote for the annuity contract.

course 8: fall 2003 -3- go to next page

retirement benefits,

comprehensive segment – canada

morning session

all questions pertain to the case study

3. (6 points) noc’s board of directors has established the following funding policy for

noc’s db erps: annual contributions equal to normal cost plus five-year amortization

of unfunded actuarial accrued liability. the cfo of noc is concerned about the

volatility of funding policy contributions.

(a) explain the effects of different asset valuation methods on this volatility.

(b) explain the effects of different asset class allocations on this volatility.

course 8: fall 2003 -4- go to next page

retirement benefits,

comprehensive segment – canada

morning session

all questions pertain to the case study

4. (12 points) the law in gevrey has been changed to permit voluntary employee

contributions of up to 5% of pay to a dc erp. the tax treatment of these contributions

is the same as for contributions to a ppa.

noc has decided to change the full- time hourly union pension plan from a flat dollar

plan to a final average earnings plan, and to add a dc erp for the union employees.

the main provisions of the new plans are:

db erp

normal retirement benefit: 1% of final five-year average earnings

times years of service

post retirement indexing: 3% per year

optional form of benefit: lump sum

the other provisions of the plan are the same as those in the noc full-time hourly

union pension plan.

dc erp

employee contributions: voluntary

matching employer contributions: 100% match on the first 3% of employee

contributions

form of benefit: lump sum or periodic pension

(a) critique the design of the new plans from the perspective of noc.

(b) critique the design of the new plans from the perspective of the hourly union

employees.

(d) describe the considerations in setting investment options to be offered to

participants in the dc erp.

(e) predict the socio-economic effects of the change in the law in gevrey.

course 8: fall 2003 -5- go to next page

retirement benefits,

comprehensive segment – canada

morning session

all questions pertain to the case study

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