The Wall Street Journal Education Program
Weekly Review & Quiz
Covering front-page articles from March 10 -16, 2007
Professor Guide with Summaries Spring 2007
Developed by: Scott R. Homan Ph.D., Purdue University
Questions 1 – 12 from The First Section, Section A
Google Gains on Goal of Controlling And Targeting TV Commercials
By KEVIN J. DELANEY and PETER GRANT
March 10, 2007; Page A1
http://online.wsj.com/article/SB117349709482933055.html
Google Inc. has established a toehold in pursuing of one its next big ambitions:
controlling which television ads viewers see and tailoring them to consumers' interests.
The Mountain View, Calif., company honed the highly profitable Internet model of
search advertising -- that is, selling ads targeted directly at consumers based on the terms
they enter into Web search engines. Last year, the eight-year-old company racked up
more than $10 billion of revenue by brokering online ads for itself and its partners.
Now, Google has begun a test run serving up TV commercials to cable subscribers in
Concord, Calif., people familiar with the matter say. The pilot project to bring its
approach to cable boxes represents a foray into the $54 billion U.S. market for TV
advertising -- much bigger game than Google's online turf.
Google since last year has been steering TV commercials to subscribers of cable provider
Astound Broadband, a unit of WaveDivision Holdings LLC, according to four people
familiar with the matter. When Astound's customers watch TV, some commercials spots
they see have been sold to advertisers by Google and delivered to the cable company so
they appear in the normal breaks in programming as other ads do.
While the effort is in its early stages, it underscores how Google could bring changes to
how TV commercials are sold and delivered to viewers. Other Internet companies are
also pursuing an entree into TV advertising, and any major Google success could
eventually challenge the traditional TV and advertising powers.
If the system is successful, Google could eventually try to establish itself as a middleman
for purchasing TV spots, furthering its stated goal of offering advertisers one-stopshopping across virtually all media. There is no assurance, though, that Google can repeat
its success in online-search advertising -- a field in which it had little serious competition
-- in the crowded, highly competitive arena of conventional media.
Google Chief Executive Eric Schmidt in January told analysts the company is
experimenting with TV advertising, without offering specifics. But he said the company
intends to use its technology to better target TV commercials to viewers. Rather than
every household seeing the same commercial, Google in theory might tap databases with
information about the demographics of an individual's neighborhood and examine the
content of the program being watched at a given moment to better select which ads to
beam through the TV. So, for example, a household in an area with lots of children might
be more likely to see commercials for minivans than for sports cars.
© Copyright 2007 Dow Jones & Company, Inc. All rights reserved.
WSJ Professor Guide: Page 1 of 23
While federal privacy law restricts what cable companies can do with "personally
identifiable information," the theory is that consumers will be better served seeing ads
more relevant to them and will perhaps agree to share information about their habits and
interests with Google. Such data eventually might allow Google or others to more
specifically tailor ads to individual households -- such as showing ads for dog food to
viewers who own dogs.
"Advertisers in particular will pay much higher rates for ads that are targeted than ones
that are untargeted," Mr. Schmidt noted.
The Concord effort, being conducted with a small group of advertisers, is aimed at testing
the computer and network infrastructure needed for Google to broker and deliver
commercials to cable systems more widely. In the test, advertisers are buying commercial
placements through an auction system, people familiar with the matter say. But it is at an
early enough stage that the buys are being handled manually by Google salespeople,
rather than through a full-fledged automated auction like the one Google uses to sell ads
online, one of the people says.
At this stage, the commercials aren't targeted to specific households in Concord, which
isn't far from Google's Northern California headquarters, people familiar with the matter
say. And the company likely won't on its own tap information about a specific
household's buying patterns or other behaviors in order to choose the commercials
because of the privacy concerns, one of the people says.
A spokeswoman for WaveDivision couldn't be reached for comment, but an executive
with Astound, which has more than 25,000 subscribers, confirmed the test with Google is
taking place.
"As we have stated publicly, we think we can add value to TV advertising by making this
important medium more relevant for users, measurable and more accountable for existing
and new advertisers," a Google spokesman said. "As part of this, we are currently
running a small, early phase trial working closely with a small number of partners and
advertisers."
Google's interest in TV commercials comes as the cable industry itself is turning to
advertising as a promising source of revenue. One reason: Technology developments are
starting to make it possible to target ads to specific households, as Google envisions. The
Internet and cable players all want to play a role.
Several of the largest cable operators have also had discussions with Google about
teaming up to do some form of TV advertising. Google has broached the subject with
Comcast Corp., the country's largest cable operator, with more than 23 million
subscribers, as part of broader negotiations focusing on whether Google will continue as
the search engine on Comcast's broadband portal, Comcast.net. Their current deal expires
at the end of this year.
1. Google has established a toehold in pursuing of one its next big ambitions: controlling
which _______ and tailoring them to consumers' interests.
a. radio commercials listeners hear
b. satellite radio commercials listeners hear
c. billboard ads viewers see
d. television ads viewers see Correct
© Copyright 2007 Dow Jones & Company, Inc. All rights reserved.
WSJ Professor Guide: Page 2 of 23
2. The cable industry is turning to _______ as a promising source of revenue.
a. pay per view for children
b. advertising Correct
c. rural subscribers
d. eliminating illegal hookups
The Texas Wind Powers A Big Energy Gamble
By JEFFREY BALL
March 13, 2007; Page A1
http://online.wsj.com/article/SB117347331863532510.html
SILVERTON, Texas -- Deep in the heart of Texas, multinational giants are gambling on
a new supply of energy. The prize isn't oil. It's wind.
In this pancake-flat country, where the wind blows so relentlessly that the sagebrush and
mesquite are permanently bent, Royal Dutch Shell Group, BP PLC and a winddevelopment company owned by Goldman Sachs Group Inc. are racing to lease vast
expanses of ranchland. In a bet on wind power's long-term viability, they're planning to
erect what would be some of the biggest wind farms in the world, with thousands of wind
turbines costing some $2 million apiece.
HEATING UP
But generating power from wind isn't profitable without government tax breaks, which in
the past have been offered and taken away. The big proposed projects in Texas, like those
elsewhere in the country, are dependent on regulators approving transmission lines to
connect remote and windy regions to major power markets. If the new lines aren't built,
the projects are doomed. Such uncertainty has dashed hopes for fossil-fuel alternatives
before, creating a boom-and-bust cycle not unlike the one that typifies the oil industry
itself.
Energy companies investing in wind power are expecting governments to toughen rules
relating to traditional energy sources, part of long-term efforts to reduce global-warming
emissions and reliance on Middle East oil. As a result, they're hoping renewable energy
will become a profitable niche, not merely one that allows them to burnish their green
credentials.
3. Deep in the heart of Texas, multinational giants are gambling on a new supply of
______ energy.
a. nuclear
b. brown oil
c. coal
d. wind Correct
4. The big proposed projects in Texas, like those elsewhere in the country, are dependent
on regulators approving ______.
a. tax breaks
b. tax cuts
c. federal energy bonds
d. transmission lines to connect remote regions to major power markets Correct
© Copyright 2007 Dow Jones & Company, Inc. All rights reserved.
WSJ Professor Guide: Page 3 of 23
How Five New Players Aid Movement to Limit CEO Pay
By JOANN S. LUBLIN and PHRED DVORAK
March 13, 2007; Page A1
http://online.wsj.com/article/SB117372189493934353.html
Meredith Miller, a low-key state official with a lot of clout, is helping rev up the
movement to limit executive pay. Charged with helping protect Connecticut's $24-billion
public-employee pension fund, she recently prodded financial powerhouses such as
Morgan Stanley into making changes to their compensation practices.
Ms. Miller, 51 years old, is part of an unusual new movement that has turned executivepay activism into a potent mainstream force, and not just the redoubt of gadflies. It now
counts as members academics, mutual-fund trustees, foreign institutional investors, union
leaders and politicians.
EXECUTIVE PAY
Last year, mutual-fund companies withheld votes to re-elect directors at Pfizer Inc. and
Home Depot Inc., whose chief executives enjoyed big pay packages despite their
companies' poor share performance; both have since resigned. This year through March
9, investors had submitted 266 shareholder proposals related to executive pay, almost
double the year-earlier period, according to proxy adviser Institutional Shareholder
Services.
Rep. Barney Frank, meanwhile, held a hearing last week on a bill that would require
companies to give shareholders an advisory vote on executive-pay deals. Mr. Frank,
chairman of the House Financial Services Committee and a Massachusetts Democrat,
previously introduced legislation to give shareholders a veto. He says he made the change
to gain congressional Republican support and improve the chances that President Bush
will sign the bill.
"Heck, even the president says there's a problem," says Mr. Frank, referring to a speech
given by President Bush in January urging boards to guard against oversized CEO
paychecks.
These activists sometimes form loose networks to share strategies and lobby for each
others' causes. A few are uncomfortable with the "activist" label. John A. Hill, chairman
of the board of trustees at mutual-fund giant Putnam Funds, says he joined the debate
partly because he didn't "want to cede the terrain" to traditional activists with little
business background.
Some are driven by professional motives, others by political ones. Uniting them all is
distaste for large exit packages given to ousted chief executives and recent revelations
about rigged stock options. Executives who collect sky-high pay despite poor corporate
performance are a particular target. Unlike the public grandstanding common to some
activists in the past, this crowd prefers to work behind the scenes, often through
persuasion rather than confrontation.
Recent regulatory changes reflect the movement's clout, and have also helped stoke its
fires. Under new federal disclosure rules, companies have to give investors more
information about executive pay, perks and retirement benefits in their proxy statements.
The tallies, which are slowly being released, could be eye-popping.
© Copyright 2007 Dow Jones & Company, Inc. All rights reserved.
WSJ Professor Guide: Page 4 of 23
It's hard to say whether the new activism will curb pay. Past efforts have fallen short,
sometimes because companies found new ways to compensate executives, and sometimes
because regulations had the perverse effect of pushing pay higher. Mark Reilly, a partner
at 3C Compensation Consulting Consortium, estimates that under the new disclosure
rules, nearly half of the 500 biggest public companies will reveal CEO pay packages of
around $100 million -- including 2006 compensation, stock-option exercises and
accumulated pension benefits.
5. Meredith Miller, a low-key state official with a lot of clout, is helping rev up the
movement to limit_____.
a. minimum wage
b. social security benefits
c. executive pay Correct
d. health insurance costs
6. Under new federal disclosure rules, companies have to give investors ____.
a. more information about profits and losses
b. more information about executive vacation schedules and destinations
c. less information about executive pay, perks and retirement benefits
d. more information about executive pay, perks and retirement benefits Correct
For Booming Biotech Firms, A New Threat: Generics
By ANNA WILDE MATHEWS in Washington and LEILA ABBOUD in Zagreb,
Croatia
March 14, 2007; Page A1
http://online.wsj.com/article/SB117383624848536301.html
The future of the biotechnology industry may lie in a steel-and-glass research center a
few miles from the red-roofed medieval buildings of the Croatian capital, Zagreb.
Inside, scientists at U.S. generics maker Barr Pharmaceuticals Inc. are working on
copycat versions of some of biotech's biggest hits, drugs that cost the American healthcare system billions of dollars a year. Their goal is to sell them someday in the U.S.
It's a critical turning point for the biotech industry. Companies such as Amgen Inc. and
Genentech Inc. have recorded spectacular growth over the past decade. One reason for
their lofty stock prices: Unlike the pills from traditional drug makers, biotech drugs
almost never face competition from generics even after their patents expire.
That's likely to change. Europe has already cleared the way for copycat biotech drugs,
and the U.S. Congress, now in the control of Democrats, is gearing up to do the same.
Powerful Democrats such as Hillary Clinton and Charles Schumer of New York in the
Senate and Henry Waxman of California in the House have proposed bills that have the
biotech industry up in arms. The bills would give the Food and Drug Administration
authority to approve biotech copies without the full testing required of originals.
"I don't think it's whether it will happen, it's a question of when it happens," says Barr
Chief Executive Bruce Downey.
Biotech companies are fighting to stall the legislation, warning that knockoff medicines
could pose serious risks unless the FDA requires extensive testing before approval.
© Copyright 2007 Dow Jones & Company, Inc. All rights reserved.
WSJ Professor Guide: Page 5 of 23
"These products are not identical, and cannot be identical, scientifically and
commercially," says Kevin Sharer, the chief executive of Amgen.
Biotech executives also say that if the door is thrown wide open to generics, research into
cancer and other diseases would be hurt and the economies of biotech centers such as the
San Francisco Bay area would suffer a blow. The Waxman bill "would have a devastating
impact on the industry," says Genzyme Corp. CEO Henri Termeer. Global spending on
biotech drugs totaled more than $60 billion last year, according to an estimate from IMS
Health, double the 2002 figure.
Traditional drug companies mostly make "small-molecule" drugs, typically in the form of
pills. Most can be cooked up by mixing chemicals in a series of well-defined steps.
Biotech drugs, also called biologics, are proteins manufactured in living cells. Scientists
typically splice genetic material into bacterial, yeast or mammalian cells, which then
produce the proteins. A single molecule of these proteins may weigh 100 times as much
as a single molecule of the active ingredient in Prozac.
Simple tests can confirm whether a copycat version of Prozac is identical to the real
thing. Everyone agrees it's a lot harder to do so for a drug like Amgen's Epogen, a protein
that boosts red blood cells, but generics companies say that thanks to scientific advances,
they can show their versions are effectively equivalent.
For makers of small-molecule drugs, no legislation is more important than the HatchWaxman Act of 1984. It says that to gain FDA approval, makers of generic smallmolecule drugs merely need to show that their products are equivalent to the originals.
7. The future of the biotechnology industry may lie in a steel-and-glass research center a
few miles from the red-roofed buildings of ______.
a. Zagreb Correct
b. San Juan
c. Phoenix
d. Los Angeles
8. Unlike the pills from traditional drug makers, _____ almost never face competition
from generics even after their patents expire.
a. biotech drugs Correct
b. vitamins
c. insulin liquids
d. insulin nasal sprays
From Wall Street, a Warning About Cancer-Drug Prices
By GEETA ANAND
March 15, 2007; Page A1
http://online.wsj.com/article/SB117391934158537592.html
Two years ago, Steven Harr urged Genentech Inc. to lower the price of a key drug that
was helping buoy its stock price. He was an unlikely messenger because of his job: a
Wall Street research analyst whose investing clients crave profits.
In a conference room with 30 senior managers from the biotech company, Dr. Harr said
he feared patients wouldn't be able to afford the drug Avastin, which costs about $47,000
© Copyright 2007 Dow Jones & Company, Inc. All rights reserved.
WSJ Professor Guide: Page 6 of 23
for the average 10-month course of treatment for colorectal cancer. He warned that
Congress "will get involved when its constituents can't get drugs." Genentech later
capped Avastin's price, acknowledging the influence of Dr. Harr, among many others.
From his perch at Morgan Stanley, the 36-year-old Dr. Harr has become an important
gadfly on the most controversial issue in the biotech industry: drug pricing. A burst of
expensive new drugs -- routinely costing tens of thousands of dollars a year -- is boosting
the fortunes of biotech companies, which say the prices reward investors; reflect the
difficulty of developing these medicines and fuel vital research. But the costs are setting
off a growing outcry from patient advocates, doctors and Congress, which is considering
two bills aiming to bring prices down.
Wall Street analysts rarely speak out for fear of alienating the companies they cover. But
as Dr. Harr sees it, the high costs are bad for business. He has repeatedly argued that
rising drug prices could trigger government controls, hurting the industry long term. He
says soaring cancer-drug prices, generating fat profit margins, aren't sustainable.
"I do not favor government setting prices on drugs because it will stymie innovation," he
says, "but it is my fear that this will happen."
Advances in research are changing cancer from a death sentence to a chronic disease for
many people. That is also bringing huge new costs: In 2002, cancer drugs accounted for
13% of the nation's drug spending, according to Morgan Stanley; this year it says such
spending is projected to almost double, to 22%.
For now, the high prices of cancer drugs are continuing to boost the stocks of companies
that make them. Indeed, investors who followed Dr. Harr's advice on Genentech stock
would have missed out on a 25% surge in the two years he urged caution on the shares.
Propelled by sales of expensive new drugs, Genentech, based in South San Francisco,
Calif., is one of the world's fastest-growing companies. It reported revenue of $9.3 billion
in 2006, a 40% increase from 2005. Net income rose 64% in 2006 to $2.1 billion.
But a pushback on drug prices is gathering steam in the Democrat-controlled Congress.
And already, the two biggest biotechs, Genentech and Amgen Inc., have taken initiatives
to cap prices of certain cancer drugs.
Dr. Harr "pointed out a potential risk that wasn't completely understood by everyone,"
says Jay Markowitz, a surgeon and now a biotechnology analyst at mutual-fund company
T. Rowe Price Group.
9. Dr. Harr has repeatedly argued that rising drug prices could trigger _____.
a. insurance companies to buy drug companies
b. more government spending
c. government controls Correct
d. the development of government labs
10. In 2002, cancer drugs accounted for 13% of the nation's drug spending, according to
Morgan Stanley; this year it says such spending is projected to be ___.
a. 22% Correct
b. 25%
c. 32%
d. 35%
© Copyright 2007 Dow Jones & Company, Inc. All rights reserved.
WSJ Professor Guide: Page 7 of 23
Ex-Telecom CEO Fields 'Black Box' Trial Defense
By DIONNE SEARCEY and PETER LATTMAN
March 16, 2007; Page A1
http://online.wsj.com/article/SB117399774505338518.html
Nearly five years after he left the former telecom highflier Qwest Communications
International Inc., Joseph Nacchio is set to go on trial for insider trading. The government
claims he sold $100.8 million of Qwest stock in 2001 while knowing that financial woes
were mounting at the company he led as chief executive. Jury selection starts Monday in
Denver federal court.
But what seemed a straightforward insider-trading case now is looking more like a spy
saga. Mr. Nacchio, while acknowledging he sold shares right before the stock plunged in
2001 amid poor financial results, maintains that he actually was personally upbeat about
Qwest's prospects while he was cashing out.
His reason: He had classified information about big national-security-related federal
contracts that he thought Qwest would win. These "black book" contracts, as they're
known in the industry, would have kept its results in line with expectations, his lawyers
say in pretrial filings.
There is evidence Mr. Nacchio had access to the highest levels of government. To that
point, court filings show that Mr. Nacchio met in the White House with such high-level
figures as Condoleezza Rice and Richard Clarke in early 2001 about telecom-related
national-security issues. The defense may bring up the meeting at the trial.
Government lawyers representing four clandestine agencies -- so secret their names can't
be mentioned in court -- have aggressively fought the release of much of the classified
material sought by Mr. Nacchio. Prosecutors say the whole national-security aspect of his
defense is a smokescreen with no relevance.
The stakes are high for Mr. Nacchio, a charismatic and brash telecom veteran now 57
years old. If convicted on many of the 42 insider-trading counts, he could conceivably
face life in prison. Legal experts say a maximum of 10 years would be more likely, given
how judges interpret sentencing guidelines in such cases. He also could face forfeiture of
nearly $101 million, the value of the stock sold.
Other legal proceedings against Mr. Nacchio, including a Securities and Exchange
Commission civil fraud suit against him and six other former Qwest executives, are on
hold until after the trial.
The Nacchio criminal case is among the last of a string of high-profile prosecutions of
corporate brass brought earlier this decade. It comes at a time when there's been a shift in
attitudes toward white-collar crime. Since the White House formed a Corporate Fraud
Task Force in July 2002 amid the Enron Corp. and WorldCom Inc. debacles, some of the
tough tactics used by the Justice Department have come under criticism. In recent
months, the Justice Department has reinforced protections for white-collar defendants
that had been eroded.
"The Qwest investigation started in the whirlwind of the corporate fraud cases," says
Jacob Frenkel, a defense lawyer at Shulman, Rogers, Gandal, Pordy & Ecker in
Rockville, Md. "Now the winds are changing."
© Copyright 2007 Dow Jones & Company, Inc. All rights reserved.
WSJ Professor Guide: Page 8 of 23
Qwest sprang up in the mid-1990s, formed by railroad magnate Philip Anschutz, who in
1997 put Mr. Nacchio in place as CEO to take the business public. Qwest soon took over
a Baby Bell, U S West, and set out to build a fiber-optic network to carry Internet traffic
world-wide. But many others had the same idea, spending billions to string fiber, and
when demand didn't match their dreams, the telecom bubble burst and start-ups hit hard
times.
Amid their woes, they sometimes pumped up revenue by swapping fiber-optic capacity
and interpreting accounting rules so they could recognize revenue for the capacity they
swapped. Amid exposure of this maneuver and the general telecom slump, Qwest nearly
slipped into bankruptcy court. Mr. Nacchio resigned in 2002 and the next year Qwest
restated two years of results, eliminating $2.48 billion of revenue for 2000 and 2001.
Mr. Nacchio was indicted in December 2005. The U.S. has had mixed results in prior
prosecutions of former Qwest executives. It has charged six besides Mr. Nacchio with
insider trading or accounting-related crimes, and won plea deals from four, but none got
prison time. Those four are cooperating with prosecutors in the Nacchio case. The two
others were acquitted.
For Mr. Nacchio's case, everyone from attorneys to the judge to a court reporter has had
to get high-level security clearance. The government has redacted pages of material Mr.
Nacchio wants to present. Some are so heavily censored they look blank.
Before reviewing classified materials, Mr. Nacchio and his lawyers must ask the judge
for permission, a process that has essentially revealed the defense's strategy. To prepare
and review court filings, he and his New Jersey-based lawyers have repeatedly traveled to
Washington to review classified information in a Sensitive Compartmented Information
Facility, or SCIF.
These facilities are generally steel-lined and protected with copper foil and other
materials to block transmissions. Mr. Nacchio's is a nondescript conference room in the
Department of Homeland Security, where lawyers must check their computers and
phones at the door. They must draft any legal briefs concerning the classified material on
an old government-issued laptop and hand them over to a security officer, who files the
pleading under seal. When the prosecution files response papers, the defense team has to
travel back to the SCIF in Washington, or another SCIF in Denver, to review them.
It's possible all the jostling over classified material could end up amounting to pretrial
gamesmanship. In the run-up to the recent perjury trial of former Dick Cheney aide I.
Lewis Libby, the parties fought over the use of classified documents. But when the
defense didn't put Mr. Libby on the stand, the judge curtailed the use of the information.
Mr. Nacchio's lawyers have also raised more-traditional defenses. Their filings say that
what he knew about the company's finances when he sold stock wasn't "material"
information requiring disclosure to investors. The defense also is expected to argue that
Mr. Nacchio sold stock for personal reasons having nothing to do with any confidential
information he had.
He and his lawyers are navigating murky legal terrain outlined in the Classified
Information Procedures Act. That 1980 federal law lays out procedures for courts and
lawyers to follow to access classified files. Congress enacted it after some government
officials had evaded prosecution by threatening to reveal classified information at trial, a
practice known as "graymail."
© Copyright 2007 Dow Jones & Company, Inc. All rights reserved.
WSJ Professor Guide: Page 9 of 23
Prosecutors have said in pretrial maneuvering that the national-security elements of Mr.
Nacchio's defense are a red herring, in part because Qwest's revenue from government
contracts was too small to offset other problems Mr. Nacchio knew were mounting at the
company.
11. In July 2002 amid the Enron and WorldCom debacles the White House formed a
________.
a. Corporate Trading Task Force
b. Stock Trading Task Force
c. Corporate Savings Task Force
d. Corporate Fraud Task Force Correct
12. The practice of trying to evade prosecution by threatening to reveal classified
information at trial is known as _____.
a. graymail Correct
b. whitemail
c. graywash
d. whitewash
Questions 13 – 17 from Marketplace
After Rejecting Pay, Some CEOs Find Less Can Be More
By GEORGE ANDERS
March 12, 2007; Page B1
http://online.wsj.com/article/SB117365359640633588.html
Is it a publicity stunt or an act of bravery for a chief executive officer to announce that he
or she is taking a pay cut?
Steve Appleton has a rare perspective on that question. He's the CEO of Micron, the
Boise, Idaho, semiconductor company. In October 2001, he announced that his annual
salary of $800,000 would be dropping to zero, effective immediately. Micron was being
hit hard by a downturn in the chip business and needed to make major layoffs. Mr.
Appleton figured that in tough times, good leadership called for him to share in the pain.
Only when Micron returned to profitability, he declared, would he resume his regular
salary. He didn't specify a time frame, but most people figured Micron was up against the
usual industry slump of six to nine months. They were wrong.
13. Steve Appleton the CEO of Micron, the Boise, Idaho, semiconductor company in
October 2001, announced that his annual salary of $800,000 would be dropping to ___.
a. zero Correct
b. 1 dollar
c. 100,000 dollars
d. 500,000 dollars
© Copyright 2007 Dow Jones & Company, Inc. All rights reserved.
WSJ Professor Guide: Page 10 of 23
How Search-Engine Rules Cause Sites to Go Missing
By KEVIN J. DELANEY
March 13, 2007; Page B1
http://online.wsj.com/article/SB117375265591935029.html
Some entrepreneurs have built thriving businesses largely by getting search engines such
as Google Inc.'s to direct customers to their Web sites. But what happens when the search
engines suddenly start pointing consumers somewhere else?
That is a possibility with which Topix.net Chief Executive Rich Skrenta is struggling this
month. The news site, which is majority owned by media giants Gannett Co., McClatchy
Co. and Tribune Co., paid a Canadian company $1 million for the Web address
Topix.com in January. Mr. Skrenta intends to switch his site over to the more popular
.com Web address from .net soon to help eliminate confusion and increase credibility
with consumers.
Such a simple change, Mr. Skrenta has discovered, could have disastrous short-term
results. About 50% of visits to his news site come through a search engine -- and about
90% of the time, that is Google. Some companies say their sites have disappeared from
top search results for weeks or months after making address switches, due to quirky rules
Google and other search engines have adopted. So the same user who typed "Anna
Nicole Smith news" into Google last week and saw Topix.net as a top result might not
see it at all after the change to Topix.com.
Even if traffic to Topix, which gets about 10 million visitors a month, dropped just 10%,
that would essentially be a 10% loss in ad revenue, Mr. Skrenta says. "Because of this
little mechanical issue, it could be a catastrophe for us," he says.
Further frustrating him is that Google's response to Topix's plea for help was an email
recommending that, if the switchover were to go badly, the company should post a
message on an online user-support forum; a Google engineer might come along to help
out. "This can't be the process," Mr. Skrenta says. "You're cast into this amusing,
Kafkaesque world to run your business."
He's among a growing group of businesspeople whose fortunes are buffeted or burnished
by the invisible, constantly evolving mathematical formulas at the heart of Web search
engines. The influence of search engines has only grown in recent years, as they have
become the de facto gateways for many of the more than 180 million American Internet
users to anything they might do online. They also have become a crucial tool for
businesses that depend on those users finding them.
But as a way to lure customers to a site, search rankings often aren't dependable.
Overnight, sites can disappear from top results for any given search term -- say, "Miami
hotels" -- and cause the sites' revenues plummet as potential customers go elsewhere.
Among the most common reasons for unpredictable changes in rankings are frequent
updates to search engines' algorithms. These mathematical formulas analyze billions of
Web pages for dozens of factors, such as the most prominent words on the pages and
what other sites link to the pages, in order to determine how to rank them for relevance to
a query. Search companies change algorithms partly to frustrate people who try to
inappropriately boost their sites in the results, but legitimate businesses sometimes feel
they're caught in the crossfire.
© Copyright 2007 Dow Jones & Company, Inc. All rights reserved.
WSJ Professor Guide: Page 11 of 23
14. Among the most common reasons for unpredictable changes in web search rankings
are frequent updates to search engines' ______.
a. algorithms Correct
b. web pages
c. computer codes
d. graphics
H-P's Pension Switch Signals End to Era Of Cozy Retirements
By LEE GOMES
March 14, 2007; Page B1
http://online.wsj.com/article/SB117381496430135822.html
Art Dill, president of the IBM Retirement Club in San Jose, remembers well when he left
his company in the early 1990s. He received, in addition to the traditional gold watch, a
$1,000 bonus and a company-sponsored dinner for him and 10 of his friends at the
restaurant of his choice. For IBM retirees these days, says Mr. Dill, things are more
perfunctory: a modest ceremony in which co-workers gather around the departing
employee in some corner of the office to pay tribute.
Ceremonies aren't the only thing that is changing about retirement. The old-guard tech
companies, the last bastions of traditional pensions, finally have joined their younger
counterparts in the New Economy. Pensions that guarantee a set payout upon retirement
are no more. In their place are 401(k)s, in which retirement benefits depend on how much
individuals chose to set aside, along with how well their investments did.
One of the last holdouts from the old school was Hewlett-Packard, the 68-year-old
Silicon Valley company long considered one of the most benevolent of U.S. employers.
Late last month, the company announced it would be phasing out its pension plan for new
employees and replacing it with a 401(k).
The company said it took the step -- which mirrors similar moves over recent years by
IBM and Motorola, among others -- as part of its efforts to remain competitive.
When you read about "high-tech retirees" in the newspaper, they tend to be the highly
visible entrepreneurs whose companies have just gone public and who can afford to turn
off the alarm clock while still in their 20s or 30s, at least until they start all over again.
The more common retiree profile, however, is the traditional one: the person who
dutifully serves 20 or 25 years as an employee before packing up the files and spending
more time with the grandchildren. If they take a cruise, it isn't on their own yacht, but on
a larger ship -- with a few thousand others.
Employees who retired before the turn of the century were able to take advantage of
rising stock and real-estate prices over the past few decades to accumulate a nest egg.
Their golden years, while dogged with the same uncertainty about rising health-care costs
that everyone feels, are typically marked by activity and comfort.
The bigger and older companies, such as IBM and Intel, even have active retirement
groups. Often, a company lets these groups use corporate facilities for meetings. The H-P
retirees' chapter near the company's Palo Alto, Calif., headquarters has 2,000 members.
They are, by and large, a contented group and the meetings are purely social, reports their
president, Stan McCarthy. The most heated debates tend to involve the locations of the
group's social events.
© Copyright 2007 Dow Jones & Company, Inc. All rights reserved.
WSJ Professor Guide: Page 12 of 23
At IBM, a group gets together every month to keep up with all the technology the
company has produced. A recent session, for example, involved the ins and outs of
burning DVDs. There are trips abroad, regular social events and end-of-year dinners.
15. Pensions that guarantee a set payout upon retirement are no more. In their place are
___.
a. 501c3 s
b. 501k s
c. 401c3 s
d. 401k s Correct
Why Coke Aims to Slake Global Thirst for Safe Water
By BETSY MCKAY
March 15, 2007; Page B1
http://online.wsj.com/article/SB117392644638537761.html
Hoping to restore some of the goodwill that made its flagship product a global icon,
Coca-Cola Co. has gone on a clean-water kick in the developing world.
In Kenya, where more than half of the rural population has no access to clean water, the
Atlanta beverage giant brought water-purification systems, storage urns, and hygiene
lessons to 45 schools in a poor western province. Children learn how to use a chlorinebased solution to kill diseases that come from contaminated, muddy pools or remote
wells -- and are taught to teach their parents.
In Mali, Coke is helping extend municipal water taps beyond the country's capital of
Bamako. In India, where the company has been accused of draining water from poor
communities for its own use, the company is building rainwater-harvesting structures to
help alleviate chronic water shortages. Coke's bottlers are also implementing waterefficiency measures.
More than 1.2 billion people lack access to safe drinking water, and 2.6 billion -- about
40% of the world's population -- lack proper sanitation, resulting in waterborne diseases
that infect and kill about two million people a year, according to the United Nations. And
global population growth and rising industrial production are increasing competition for
the world's freshwater supplies.
Coke has some 70 clean-water projects in 40 countries, a service it hopes will eventually
boost local economies and broaden its consumer base. But the efforts are also part of a
broader strategy under Chairman and Chief Executive E. Neville Isdell to build Coke's
image as a local benefactor and global diplomat. "You have to be an integral and
functioning part both in perception and reality in every community in which you
operate," he said in an interview.
16. About _____ of the world's population lack proper sanitation, resulting in waterborne
diseases that infect and kill about two million people a year, according to the United
Nations.
a. 40% Correct
b. 30%
c. 20%
© Copyright 2007 Dow Jones & Company, Inc. All rights reserved.
WSJ Professor Guide: Page 13 of 23
d. 10%
Look, It's Mii -- on Wii!
By YUKARI IWATANI KANE
March 16, 2007; Page B1
http://online.wsj.com/article/SB117401269287238992.html
David Merrill, a 28-year-old graduate student in Somerville, Mass., struggled recently
with a popular feature on Nintendo Co.'s Wii videogame console. Try as he might, he just
couldn't get the game character he created, called Mii, to look like himself.
Frustrated, Mr. Merrill turned to the pros. He shelled out $5 to a Web-based service
called Mii Station (www.miistation.com1), run by a Tokyo entrepreneur, which creates
look-alike game characters for Wii based on photos. Three days later, he received a Mii
with spiky hair and a really big smile that he says pretty much captured his essence.
"It's made playing Wii a little more personal," says Mr. Merrill, adding that he doesn't
have the perspective that graphic artists have to know what facial features to emphasize.
"That makes a big difference."
Nintendo's Wii game console has been a wild success since its launch late last year,
mainly for its simple controller that can be waved around to simulate swinging a tennis
racket or sword. Now, another feature called the Mii, which lets users create their own
game characters using a selection of facial characteristics to appear on the screen, is
sparking a creative frenzy. Over the past few months, the Mii has spawned a fast-growing
secondary market, with more than a dozen Web sites selling T-shirts, beer mugs and
statuettes with Miis on them, or simply sharing Mii creations of celebrities, politicians
and fictional figures like Darth Vader.
"People really identify with [their Mii] characters," says Michael Buckbee, who runs a
Web site called Fabjectory (www.fabjectory.com2) that sells statuettes of virtual objects,
and has recently started offering five-inch customized Mii figures for $100. Mr. Buckbee
won't say how many figurines he has sold.
The popularity of the Mii could provide additional momentum for Nintendo, which has
already sold 3.2 million units of the $250 console as of the end of December since its
launch. While rival products, such as Microsoft Corp.'s Xbox 360 and Sony Corp.'s
recently launched PlayStation 3 consoles are available on store shelves, demand for the
Wii have been so high that consumers have stood in long lines or have paid a premium on
eBay Inc.'s online auction site for the console.
For now, Mii characters can appear in only a few Wii games. In the most popular one,
Wii Sports, Miis can play tennis, bowl, golf or box while users move the controller. And
possibilities are endless. Users can have their likeness play tennis with, say Michael
Jackson's, or have George W. Bush box with Saddam Hussein. Nintendo says it plans to
come out with more games that can use Miis.
Unique game characters that represent players, known as avatars, are available in online
multiplayer computer games like Second Life. But while the norm for these avatars is to
create a fantasy character, the Wii is the first game system for the mass market to actively
encourage players to create characters that look like themselves.
© Copyright 2007 Dow Jones & Company, Inc. All rights reserved.
WSJ Professor Guide: Page 14 of 23
17. The ______ is the first game system for the mass market to actively encourage
players to create characters that look like themselves.
a. XBox
b. Playstation3
c. Mii
d. Wii Correct
Questions 18 – 23 from Money & Investing
New Battle Over Reform Of Americans' 401(k)s
By TOM LAURICELLA
March 10, 2007; Page B1
http://online.wsj.com/article/SB117348918665932868.html
Insurance companies and mutual-fund firms are locking horns over rules that will
determine where millions of Americans' retirement money will be invested.
At issue: which types of investments should receive the government's blessing as
appropriate for those participants in 401(k) retirement plans who decline to choose for
themselves where to invest, leaving the matter to their employers.
Before Congress passed the Pension Protection Act last summer, employees who didn't
opt otherwise routinely had their 401(k) money dumped into one of two safe-but-lowyielding options: money-market funds or insurance-based products known as stable value
funds or guaranteed investment contracts.
To bolster retirement savings, the new law made it easier for companies to enroll
employees in 401(k) plans automatically and to put their 401(k) money into potentially
higher-yielding stock and bond funds.
Now the Labor Department is drafting rules to implement the law, prompting a lobbying
donnybrook in Washington. The Labor Department has to decide which kinds of
investments are appropriate defaults for employees who fail to choose from among
various mutual funds and other options.
In September, the Labor Department proposed regulations that would discourage
employers from putting all their employees' money into stable value funds and moneymarket funds. The department said default options needed to have a mix of investments,
usually including stocks.
18. To bolster retirement savings, the new Pension Protection Act made it easier for
companies to put employee retirement money in _____
a. higher yielding stock and bond funds Correct
b. money market funds
c. stable value funds
d. insurance-based guaranteed investment contracts
Inflation Data Likely to Guide Stock Recovery
By PETER A. MCKAY
March 12, 2007; Page C1
http://online.wsj.com/article/SB117364901644733507.html
© Copyright 2007 Dow Jones & Company, Inc. All rights reserved.
WSJ Professor Guide: Page 15 of 23
After being roiled by such abstractions as stocks in Shanghai and loans based in Japanese
yen, the U.S. stock market will return focus this week to a matter much closer to the
hearts of everyday investors and consumers: inflation.
If the benign readings that most Wall Street professionals expect come true, stocks likely
will extend the comeback they enjoyed last week, setting a positive tone for markets in
Asia and Europe.
The blue-chip Dow Jones Industrial Average has now rallied 1.9% from its recent low,
set last Monday. But it still would have to rise more than 4% to reach its Feb. 20 closing
record.
The market will digest two important measures of U.S. inflation from the Labor
Department. Analysts expect the producer-price index, a measure of wholesale-price
inflation due out Thursday, to rise 0.2% for February, excluding volatile food and energy
prices.
19. After being roiled by such abstractions as stocks in Shanghai and loans based in
Japanese yen, the US stock market will return focus this week to a matter much closer to
the hearts of everyday investors and consumers: _________.
a. interest rates
b. college basketball
c. oil prices
d. inflation Correct
Buyout Shops: Sharks Serving Vital Function
By DENNIS K. BERMAN
March 13, 2007; Page C1
http://online.wsj.com/article/SB117374835997534903.html
The buyout boom is taking on the air of a low-budget miniseries, with all the players
tidily cast in roles of good or evil.
You know what hats the leveraged-buyout shops wear. They've proven themselves
congenital opportunists and arbitragers of CEOs' personal greed. Some members of the
Senate, eager to don white hats, are mucking about, threatening to raise taxes on fees
collected by the billionaire bêtes noires.
In the real world, the role-playing is more complex, and much more interesting. Look at a
situation like DaimlerChrysler AG. At the urging of shareholders, the car company is
desperately trying to unload its slumping Chrysler business. Other auto makers are
wearily going through the motions of a deal. But Daimler's best hope remains the privateequity firms, which have even deigned to step foot in Detroit in February.
Here's where the utility of the buyout shops -- however ruthless and unlovable -- begins
to peek through. It's called liquidity. And it's a concept that anyone trying to sell an
unloved home or concert ticket can acutely appreciate.
How much liquidity are we talking about? Private-equity deals represented some 20% of
the overall M&A market last year, the biggest in history at $3.7 trillion, according to
Thomson Financial.
© Copyright 2007 Dow Jones & Company, Inc. All rights reserved.
WSJ Professor Guide: Page 16 of 23
20. Private-equity deals represented some ____ of the overall M&A market last year, the
biggest in history at $3.7 trillion, according to Thomson Financial.
a. 5%
b. 10%
c. 20% Correct
d. 30%
Out of Space, Retailers Trim Growth Plans
By KRIS HUDSON
March 14, 2007; Page C1
http://online.wsj.com/article/SB117383718102436308.html
For years, investors rewarded those retailers with fast expansion rates. Now that some
retailers have nearly tapped out their potential in the U.S., investors are punishing them
for failing to slow down.
The result is that a number of major retailers are ratcheting back on the number of new
stores they open each year and are diverting more of their spending to repurchasing
shares and increasing dividends. Among those adopting this strategy are Sears Holdings
Corp., Home Depot Inc. and AutoZone Inc.
They and other mature retailers that beefed up their buyback programs have seen their
stocks perk up in the past year. Several remain in positive territory despite the market's
roller-coaster ride in recent weeks and yesterday's report of a weaker-than-expected 0.1%
rise in February U.S. retail sales.
21. A number of major retailers are diverting more of their spending to _______.
a. repurchasing shares and increasing dividends Correct
b. buying new real estate
c. expanding store locations
d. remodeling all buildings over 2 years old
Carry Trade Might Hasten Subprime Woes
By JUSTIN LAHART
March 15, 2007; Page C1
http://online.wsj.com/article/SB117391637408137535.html
Two issues topping Wall Street's worry list -- the mortgage mess and the unwinding of
"carry trades" -- might be perilously connected.
It's possible to construct two different narratives for the recent bouts of selling that have
hit the stock market. In one, investors are fretting about trouble in subprime mortgages,
which cater to borrowers with checkered credit records. A sharp rise in mortgage defaults
could lead to problems for Wall Street banks, in the housing sector and for the economy
more broadly.
The other worry -- half a world away -- is that traders are paying back yen they've
borrowed to make investments. Many observers think the yen carry trade -- where cash
borrowed at low rates in Japan is used to fund purchases elsewhere -- has buoyed prices
of risky assets around the globe. The yen's recent strength makes it harder to pay off such
© Copyright 2007 Dow Jones & Company, Inc. All rights reserved.
WSJ Professor Guide: Page 17 of 23
loans, so carry traders are exiting their positions. One sign this is happening: Stocks and
corporate bonds have been trading in step with the dollar against the yen.
Maybe the two narratives are part of the same story. Securities backed by subprime
mortgages were probably on the shopping lists of many investors using borrowed yen to
fund higher-yielding purchases. Subprime-mortgage woes led them to sell those
securities and pay back the money they borrowed, says ITG economist Bob Barbera. To
do that, they converted dollars into yen, pushing the yen's value higher.
He says the yen has been the tail that might start wagging the dog.
Mortgages haven't been the only asset class acquired by investors using borrowed yen.
They have also been buying emerging-market debt, stocks and high-yield corporate debt.
If mortgage troubles deepen and the yen strengthens, investors might be forced to unwind
these other carry trades, prompting a wider-ranging selloff.
22. Securities backed by _____ were probably on the shopping lists of many investors
using borrowed yen to fund higher-yielding purchases.
a. timeshare mortgages
b. beach mortgages
c. prime mortgages
d. subprime mortgages Correct
As Costs Climb In Food Chain, Consumers Pay
By JUSTIN LAHART
March 16, 2007; Page C1
http://online.wsj.com/article/SB117400578730838787.html
Here's a compelling new reason to diet: You'll worry less about inflation.
Rising costs for agricultural commodities are making their way up the food chain into
food you eat. Thanks to rising demand for corn-based ethanol, corn prices have nearly
doubled during the past year. That's raised costs for corn products, like the ubiquitous
high-fructose corn syrup that's used to sweeten everything from Apple Jacks to Yoplait
Yogurt. It's also raised costs for livestock and poultry, which are fed corn, and for crops
like soybeans, which farmers are replacing so they can grow more corn.
Yesterday, the Labor Department reported February prices for "crude foodstuffs and
feedstuffs" were 18.8% above year-ago levels. Food companies are starting to pass those
higher costs on -- wholesale consumer food prices were 6.8% above year-ago levels.
Today's report on consumer inflation will probably show higher prices at the checkout
line, too.
23. Thanks to rising demand for ethanol, ____ prices have nearly doubled during the past
year.
a. sugar
b. sorghum
c. soybean
d. corn Correct
Questions 24 – 26 from Personal Journal, Section D
© Copyright 2007 Dow Jones & Company, Inc. All rights reserved.
WSJ Professor Guide: Page 18 of 23
Pension Tension: Figuring Out When to Lump It
By THEO FRANCIS
March 13, 2007; Page D1
http://online.wsj.com/article/SB117375258079935027.html
More American workers are facing a critical question as they reach retirement: whether
to take pension benefits as a single one-time cash payout, or as a lifetime stream of
monthly payments.
Companies are increasingly giving retiring employees that choice, and pension
consultants say that most retirees take the lump sum when they can. For many, however,
a lump sum may not be the wisest choice. People may spend down the money or invest it
poorly. And depending on their life expectancy, they may well reap a greater benefit by
opting for lifetime monthly payments.
Historically, pensions have been paid out as a fixed sum each month until the retiree dies,
with the option to take a reduced payment that continues for a spouse's lifetime as well.
But today, some 50% of the 22 million Americans with a private-sector pension have the
lump-sum option, up from about 15% in 1995, with more getting it every year. Over the
past decade, such companies as Eastman Chemical Co., Cooper Tire & Rubber Co. and
Citigroup Inc. have added the option as, in many cases, they switch to "cash balance" or
other cost-saving plans.
Last year's sweeping pension legislation may further complicate the lump-sum
calculation for some retirees. It allows employers with cash-balance pension plans -- in
which workers accumulate a hypothetical account balance based on their annual pay -- to
use the account value when calculating a lump-sum payout, instead of recalculating it
using average life expectancies, as was previously required. It could lead to a bigger
difference in the value of the traditional and lump-sum options.
If your financial adviser encourages you to take a lump sum, be wary. "They stand to
make a substantial amount of money" earning commissions or fees on the assets you
invest, says Gary Schatsky, a financial adviser in New York, who also receives fees on
lump sums he invests for clients.
Financial advisers may also be unaware of other reasons why lump sums may be a bad
deal. Here are five more things to consider before taking a lump sum:
Here's why: The monthly checks retirees traditionally receive from a pension (called an
annuity) are typically based on each retiree's pay and years of work. But when employers
pay out lump sums, they must convert the future monthly payments into a cash-out value.
To do this, they estimate how many years of checks the person is likely to receive, using
national average life expectancies, which were last updated in 2002.
So if you have a chronic disease, or a family history of early deaths from heart attacks, or
for some reason you don't think you'll outlive the national average, you may be better off
taking a lump sum. But if you expect to live longer than average, you may be
shortchanging yourself.
"Most people greatly underestimate what their life expectancy is," says Heidi Rackley, an
actuary at Mercer Human Resources Consulting. A man turning 65 in 2008 can expect to
live an additional 19 years, on average, recent industry estimates suggest, while a woman
is likely to live 21 more years. "A key thing people forget about 'average life expectancy'
is that half the population will live longer than that," Ms. Rackley says.
© Copyright 2007 Dow Jones & Company, Inc. All rights reserved.
WSJ Professor Guide: Page 19 of 23
Companies understand this dynamic well. Blue-collar workers tend to have shorter life
spans than the national average -- and companies with mostly blue-collar workers are less
likely to offer lump sums. By offering only monthly checks until the employee's death,
the company ends up paying out less in total pensions. General Motors Corp., for
instance, doesn't allow most of its workers to take a lump-sum payout.
Employers with mostly white-collar and female workers -- those most likely to live
longer than average -- are most likely to offer lump sums. International Business
Machines Corp. is one. GM allows its white-collar workers to take a lump sum if they
leave before retirement age.
Companies, including GM and IBM, say mortality factors don't play a role in their
decision about offering lump sums. But government data show a strong correlation
between longevity and payout options. About 31% of blue-collar workers had a lumpsum option in their pension plans, while 59% of white-collar workers did, according to a
2005 Bureau of Labor Statistics report.
• Keep in mind the age and health of your spouse, and any dependents. Married couples
may also be better off taking the monthly payments. By law, married retirees may take
monthly checks over their lifetime -- with nothing for a surviving spouse -- or instead opt
for a smaller monthly check that will continue to be paid as long as a surviving spouse
lives. (The size of the reduced check is determined largely by the spouse's age.) Life
expectancy for couples can be longer than for individuals, Ms. Rackley cautions. "There's
a good 25% chance one of them is going to live to 90."
Bedda and Paul D'Angelo each opted for monthly payments from their previous
employers, figuring they'd end up with more money in the long run. In fact, Ms.
D'Angelo, 60, now a financial adviser in Durham, N.C., says she often advises clients to
avoid taking a lump sum. "I have always preferred to bet that people are going to live
than that they are going to die" early, Ms. D'Angelo says.
Other factors can complicate the decision, however. Albert Van Lund, who retired as
head of human resources for a California utility company, seemed a shoo-in for taking
monthly payments: He and his wife were in good health, and his father had lived to 103.
He took a lump sum instead. Now 82, Mr. Van Lund says he preferred investing the
money himself, and wanted to provide for his disabled son; the monthly payments would
have ended once he and his wife died.
• Retiring early can cost you 20% of your pension or more. In a bid to encourage older
workers to retire, many large companies offer an early-retirement subsidy, effectively
paying out a full pension as much as a decade before normal retirement age.
But the law doesn't require employers to take these subsidies into account when
converting a monthly benefit into a lump sum. That alone can cost retirees 20% of the
value of their pensions or more, with longtime workers in their 40s to mid-50s losing the
most.
While employers are required by law to show workers what they would lose by taking a
lump sum, retirement experts say their information isn't always clear, and retirees don't
always realize what's at stake.
• Know the quirks of your pension plan. Some pension plans have rules that help them
win the payout roulette. Consider the multi-employer pension plan sponsored by the
© Copyright 2007 Dow Jones & Company, Inc. All rights reserved.
WSJ Professor Guide: Page 20 of 23
Marine Engineers' Beneficial Association, which covers ship engineers and deck officers.
It requires workers to meet health standards, and potentially submit to a medical exam,
before being eligible for a lump sum.
Retirees in good health can take a lump sum, but those in poor health may not be allowed
to, according to participants, plan documents and former plan officials. Current plan
officials didn't return calls seeking comment.
The provision saves the plan money because those most likely to die early will receive
only a few years' worth of pension checks, instead of a more valuable lump sum. Those
likely to live a long time, but who take the lump sum based on average life expectancy,
end up getting less than they would have with monthly checks. The pension plan wins
either way.
Less-healthy participants in the MEBA plan have an out: By requesting a lump sum at
least two years before retiring, they may take it regardless of their health. Several plan
participants said they and co-workers try to make sure to ask for the lump sum in
advance.
24. Experts say that it is better to take monthly payment of a pension plan instead of a
lump sum payout because
a. a smaller monthly payment can continue after death of pension holder to take care of
the spouse
b.it is better to bet that people are going to live than that they are going to die early
c. people may spend down the money from a lump sum or invest it poorly
d. all of the above Correct
What Is Your 401(k) Costing You?
By ELEANOR LAISE
March 14, 2007; Page D1
http://online.wsj.com/article/SB117382829088536097.html
The dollars you're salting away in your company-sponsored 401(k) plan will someday
help fund a well-earned retirement. Meantime, the company managing your retirementsavings account may be whittling away at that money to pay for all sorts of stuff -- even a
telephone help line.
401(k) plans aren't required to make clear how much participants are being charged in
fees. And there can be a lot of them, including charges to cover independent audits;
tracking and maintaining accounts; advisory services; as well as help lines, and of course
the basic expense of managing funds in a plan. In fact, investing in a fund through a
401(k) often can be more expensive than buying it through a retail brokerage account.
Now, as Congress and federal regulators look into whether the plans' expenses are
justified and whether fund firms should be required to disclose more information,
employers are taking steps on their own to cut costs for their workers. Some companies
are ditching high-cost funds and replacing them with cheaper investment options. Some
are getting more aggressive about negotiating lower fees. And many are taking extra
steps to make sure their employees understand the fees they are paying.
© Copyright 2007 Dow Jones & Company, Inc. All rights reserved.
WSJ Professor Guide: Page 21 of 23
Employers often help pay the bill. But a survey by consulting firm Hewitt Associates
showed workers have been shouldering a growing share of many plan fees in recent
years. Participants can find fund expense ratios in a prospectus. But there's typically no
clear breakdown of how much each participant is paying for various plan services like
accounting or custody of plan assets.
25. 401k participants can find fund expense ratios in a _____.
a. company handbook
b. web site
c. datasheet
d. prospectus Correct
Cyber Chic: Finding High Fashion Online
By CHERYL LU-LIEN TAN
March 15, 2007; Page D1
http://online.wsj.com/article/SB117391453295737466.html
Shoppers have long found success on the Internet with established chains like J. Crew or
Banana Republic. But increasingly, the Web is also a resource for cutting-edge style, as
the anonymity of the Internet democratizes even high-end fashion.
Now shoppers anywhere can easily buy brands once found mainly in tiny boutiques in
fashion capitals like New York. The wider choices make it easier to uncover bargains.
For the many who feel intimidated by snooty sales staff, the best part of online boutique
shopping may be that no one will know if you are buying a $1,000 purse while wearing
last season's bubble skirt.
But with the burgeoning number of clothing retailers on the Web, the choices can be truly
befuddling. Here's a guide to how the fashion-forward navigate the online shopping
landscape.
Open Secrets
A handful of trendy Los Angeles boutiques have recently gone online. Milk (now at
Shopatmilk.com) sells a handpicked mix of brands like Oscar de la Renta and emerging,
hip labels like Thailand's Sretsis. Madison, which has four boutiques that are popular
with stylists and celebrities, recently launched Madisonlosangeles.com2.
These sites join a roster of fashionable retailers now online that are known for not only
discovering new brands, but also brokering deals with labels to create exclusives for their
stores. Such deals ensure that, say, your new Rachel Pally dress won't be the same Rachel
Pally dress available at dozens of other retailers across the country. Scoopnyc.com,
Shopbop.com and Intermixonline.com are among the most popular of these.
Bluefly.com helps gauge size by showing how a handbag looks on a 5'6" woman.
Kirnazabete.com, a chic store in New York's SoHo neighborhood that sells some hard-tofind brands like luxury handbag-maker B. Romanek, sells online, too, but still has only a
small selection of items on its site. There's also Bigdropnyc.com, a trendy New York
boutique chain that relaunched its site last month with a handy "Shop by Look" section
that allows customers to buy stylist-selected outfits with such themes as "Hamptons
Social" and "Upper East Side."
© Copyright 2007 Dow Jones & Company, Inc. All rights reserved.
WSJ Professor Guide: Page 22 of 23
26. Increasingly, high-end fashion can be found for sale _____.
a. at Kmart
b. at Wal-Mart
c. at yard sales in New York
d. on the Web Correct
© Copyright 2007 Dow Jones & Company, Inc. All rights reserved.
WSJ Professor Guide: Page 23 of 23
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