Investments And Plan Portfolios

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| By Laurie Wilkinson
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Laurie Wilkinson
Community Contributor
Quizzes Created: 3 | Total Attempts: 448
Questions: 8 | Attempts: 178

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Investments And Plan Portfolios - Quiz

Questions and Answers
  • 1. 

    Target Date or Life Cycle Funds must be manually adjusted by the individual as he or she grows older to limit risk prior to retirement

    • A.

      True

    • B.

      False

    Correct Answer
    B. False
    Explanation
    Target Date or Life Cycle Funds - automatically resets the asset mix (stocks, bonds, cash equivalents) in its portfolio according to a selected time frame that is appropriate for a particular investor

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  • 2. 

    Mutual funds raise money by selling shares of the Fund to the public

    • A.

      True

    • B.

      False

    Correct Answer
    A. True
    Explanation
    Mutual funds raise money by selling shares of the Fund to the public. This means that individuals can invest in a mutual fund by purchasing shares, and the money collected from these sales is used to invest in various securities such as stocks and bonds. The investors then become shareholders of the mutual fund and can benefit from the fund's performance and any dividends or capital gains generated from the investments. This is a common method for mutual funds to gather funds from a large number of investors and pool them together for investment purposes.

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  • 3. 

    The benefits of mutual funds include (Select all that Apply)

    • A.

      Diversification

    • B.

      Professional money management

    • C.

      Liquidity

    • D.

      Front Load Fees

    • E.

      Overall reasonable fees/value for the average investor

    Correct Answer(s)
    A. Diversification
    B. Professional money management
    C. Liquidity
    E. Overall reasonable fees/value for the average investor
    Explanation
    Mutual funds offer several benefits to investors. Diversification is one such benefit, as it allows investors to spread their investments across a wide range of assets, reducing the risk associated with investing in a single security. Professional money management is another advantage, as experienced fund managers handle the investment decisions on behalf of investors. Liquidity is also a benefit, as mutual funds can be easily bought or sold on any business day. Lastly, mutual funds generally have overall reasonable fees/value for the average investor, making them a cost-effective investment option.

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  • 4. 

    OFA refers to the ability to provide plans with a dynamic line up of investments, as opposed to a fixed portfolio while plans who chose an IPS rely on ADP to identify, select, and monitor investment funds available to them

    • A.

      True

    • B.

      False

    Correct Answer
    A. True
    Explanation
    The statement is true because OFA (Open Fund Architecture) allows plans to offer a range of investment options that can be changed or adjusted over time, providing flexibility to plan participants. On the other hand, plans that choose an IPS (Investment Policy Statement) rely on ADP (Automatic Data Processing) to determine, choose, and monitor the investment funds that are available to them, limiting the flexibility and control over investment options.

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  • 5. 

    An FA or Financial Advisor is a licensed person that offers guidance and advice to

    • A.

      ADP

    • B.

      Participants and Plan Administrators

    • C.

      Other Advisors

    • D.

      Participants only

    • E.

      Plan Administrators only

    Correct Answer
    B. Participants and Plan Administrators
    Explanation
    A Financial Advisor (FA) is a licensed individual who provides guidance and advice to both ADP Participants and Plan Administrators. This means that the FA can assist both the individuals participating in the ADP plan as well as the administrators responsible for managing and overseeing the plan. The FA's role is to provide expert advice and support to help both participants and administrators make informed financial decisions and effectively manage the ADP plan.

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  • 6. 

    ADP must give defaulted participants an annual notice about their defaulted accounts

    • A.

      True

    • B.

      False

    Correct Answer
    A. True
    Explanation
    ADP, or Automatic Data Processing, is a company that provides human resources and payroll services. In the context of this question, "defaulted participants" refers to individuals who have defaulted on their retirement plan loans. According to regulations set by the Department of Labor, ADP must give these defaulted participants an annual notice about their defaulted accounts. This notice serves to inform them about the status of their accounts, any outstanding loan balances, and the potential tax consequences of their default. Therefore, the statement "ADP must give defaulted participants an annual notice about their defaulted accounts" is true.

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  • 7. 

     (QDIA) Qualified Default Investment Alternative (Select all that Apply)

    • A.

      Is exclusive to ADP

    • B.

      Allows a plan to choose an alternate investment (besides the money market or stable value) for defaulted participants, including Automatic Enrollment arrangements.  

    • C.

      Was a part of the Pension Protection Act of 2006

    • D.

      Gives the company “protection”  from defaulted participants suing them for investment losses. 

    Correct Answer(s)
    B. Allows a plan to choose an alternate investment (besides the money market or stable value) for defaulted participants, including Automatic Enrollment arrangements.  
    C. Was a part of the Pension Protection Act of 2006
    D. Gives the company “protection”  from defaulted participants suing them for investment losses. 
    Explanation
    The Qualified Default Investment Alternative (QDIA) allows a plan to choose an alternate investment for defaulted participants, including Automatic Enrollment arrangements. It was a part of the Pension Protection Act of 2006 and provides the company with protection from defaulted participants suing them for investment losses.

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  • 8. 

    QDIA Investment types can include

    • A.

      Target Date Retirement Funds

    • B.

      Balanced Funds

    • C.

      Professionally Managed Funds

    • D.

      All of the Above

    Correct Answer
    D. All of the Above
    Explanation
    The correct answer is "All of the Above" because QDIA (Qualified Default Investment Alternative) investment types can include all of the mentioned options: Target Date Retirement Funds, Balanced Funds, and Professionally Managed Funds. QDIA is a type of investment option that is automatically selected for participants in retirement plans who do not actively choose their investments. These investment types offer diversification and professional management to help individuals achieve their retirement goals.

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Our quizzes are rigorously reviewed, monitored and continuously updated by our expert board to maintain accuracy, relevance, and timeliness.

  • Current Version
  • Mar 17, 2023
    Quiz Edited by
    ProProfs Editorial Team
  • Sep 30, 2013
    Quiz Created by
    Laurie Wilkinson
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