Question

The actual return on plan assets

a. is equal to the change in the fair value of the plan assets during the year.
b. includes interest, dividends, and changes in the fair value of the fund assets.
c. is equal to the expected rate of return times the fair value of the plan assets at the
beginning of the period.
d. All of these answers are correct.

Answer 1

The actual return on plan assets includes interest, dividends, and changes in the fair value of the plan assets, making option B the correct answer.

Step-by-step explanation:

The actual return on plan assets is best described as the total rate of return, which includes interest, dividends, and changes in the fair value of the plan assets over a given time period. Therefore, the correct answer to the student's question is option B: the actual return includes interest, dividends, and changes in the fair value of the fund assets. It's not simply the change in value or the expected rate of return multiplied by the fair value at the beginning of the period; rather, it encompasses all actual gains and income received from the assets.