SOA真题November2004Course8RU

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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
2003 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.
(c) Calculate the 2001, 2002 &. 2003 Treynor Measure 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.
(c) Describe how these policies address the issues identified in (a).
(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