gwartney international someone, question, liability, only

pawn

Please refer to Question 3 on P432 in Volume 2. (Q3 of EOC questions in Reading 20)

1-What is liability duration? I thought that liability duration was an indicator of the maturity of a plans liabilities. How can gwartney have a liability duration of only 10 years and at the same time have a young workforce?

2- Can someone please explain question 1 to me. The explanation is still confusing.

Windjam

duration I believe is used in the sense of cash flows * avg length. Kind of like in a Modified Duration sense of the term in Fixed Income.

which part of question 1 (I believe you are talking about the Worden Technology Inc) confuses you?

CP

nannan66

Sorry, I meant question question 3A of gwartney international. I'm still struggling with this one

lcai

surplus=assets - liabilities

assets have gone up 10% (9% return objective + 100 bps more).
liabilities have increased by 12% - so liabilitiies increase > assets increase.
so assets - liabilities would go up more.

given 298$ = liabs, assets=300$
surplus=300-298=2

liabs become 298*1.12=333.76
assets became 300*1.1=330

so assets - liabs = surplus=330-333.76 = -3.76

CP