The Wall Street Journal Weekly Quiz s13

The Wall Street Journal Weekly Review & Quiz Covering front-page articles from October 22 – 28, 2005 Professor Guide with Summaries Fall 2005 Issue #10 Developed by: Scott R. Homan Ph.D., Purdue University

Questions 1 – 12 from The First Section, Section A

How 'Wicked' Cast Its Spell By BROOKS BARNES October 22, 2005; Page A1 http://online.wsj.com/article/SB112994038461876413.html

"Wicked" had flop written all over it when it opened on Broadway in 2003. Empty seats dotted the theater. Advance sales totaled $9 million -- not great for a $14 million production. The all- important New York Times review began: "There's trouble in Emerald City." And it failed to win the Best Musical honor at the Tony Awards, usually a death knell for a show with no marketable stars. Today "Wicked" -- billed as a prequel to L. Frank Baum's tales of the Land of Oz -- is a moneymaking machine, thanks to a deft strategy that transformed it into the launch pad for a much broader brand. Sales for future shows stand at a robust $30 million. Two North American tours are doing big business while weekly sales of products -- everything from $20 "Wicked" golf balls to $35 themed necklaces -- exceed $300,000. That's more than most Broadway plays gross in a week. And the musical, backed in part by Universal Pictures, is just starting to tap the new mother lode of the theater business: world-wide touring and licensing. A London outpost opens next year and there are plans to dispatch Wicked Witches of the West to Germany, Australia and Japan. (That's an ambitious project, since "The Wizard of Oz" isn't as well-known in other countries as it is in the U.S.) Other revenue streams include a movie version and possible tie-ins with products such as Sprint cellphones and green M&Ms. A 192-page coffee-table book hits stores next week. "Wicked" owes a lot of its popularity to its twist on a much-loved story and its "American Idol"-esque score, which has been a hit with teenage girls. But its success is also rooted in a big shift under way on Broadway and the broader world of entertainment. Musicals, much like kids' cartoons or fashion shows, are no longer merely products in and of themselves. These days, Broadway is borrowing a page from Hollywood's playbook: Use the initial production as a platform for building a world-wide franchise. "The theater business is like a loaf of bread," says Thomas Schumacher, president of Walt Disney Co.'s theatrical unit. "Broadway is the yeast." Broadway, famous for its hoary business practices, is finally catching up to the model for so much of the rest of the entertainment industry. A book becomes a TV show, which becomes a videogame, a set of DVDs and a line of clothing. And this replicates itself all over the world. Just as DVDs and overseas ticket sales can now provide more than 60% of the revenue for a movie, the real Broadway money increasingly comes after shows establish themselves on the Great White Way. Eleven clones of "Mamma Mia!" are currently running around the world. The musical, based on the songs of 1970s band ABBA, has grossed more than $1.4 billion world-wide since it launched six years ago. "Phantom of the Opera," which opened in 1988, has grossed $3.2 billion world-wide and opens a new $35 million production in Las Vegas next spring. It became a movie last year. Premiering next month: A film version of the hit musical "Rent."

© Copyright 2005 Dow Jones & Company, Inc. All rights reserved. WSJ Professor Guide: Page 1 of 17 1. The financial success of the Broadway musical “Wicked” is due in part to: a. using the initial production as a platform for building a world-wide franchise Correct b. product placement c. using magical spells to extract money from patron’s wallets d. its transition from a popular Universal Studios Theme Park ride

2. The show “Wicked” gained popularity by: a. repeat ticket buyers b. getting fantastic reviews c. word of mouth d. Both a and c Correct

Selective Coverage A Big Insurer Bets on Hot Trend: Shopping Around for Health Care By VANESSA FUHRMANS October 24, 2005; Page A1 http://online.wsj.com/article/SB113011622503277210.html

MINNETONKA, Minn. -- In its three decades, UnitedHealth Group Inc. has helped drive some of the biggest shifts in the U.S. health-care system -- and made hefty profits doing so. Now the big health insurer is at the leading edge of the latest trend sweeping the industry: so-called consumer-driven health care. The principle of consumer-driven plans is that people will shop for the best care at the lowest price if they have to pay more of the cost themselves. The idea is a response to traditional plans in which employers pay most of the bill after modest deductibles and co-pays, leaving consumers with little incentive to curtail their medical spending. UnitedHealth's efforts show how consumer-driven plans are beginning to shake up the way Americans get their health insurance. UnitedHealth has spent hundreds of millions of dollars to buy two pioneering companies in the field that help it offer plans with high deductibles. It wants to help people navigate the health-care system more wisely with information on cost and quality. And with a landmark federal law allowing people to build up a health-care nest egg in tax-free "health savings accounts," the company has opened a bank. It hopes to manage the accounts much as Fidelity Investments handles corporate 401(k) plans. There's nothing wrong with UnitedHealth's business at the moment. Net income nearly doubled to $2.59 billion between 2002 and 2004, and the stock price is up more than 60% in the past year. Chief Executive William McGuire, a pulmonologist who joined the company in 1988 and became CEO in 1991, earned $124 million last year, mostly from cashing in stock options. But UnitedHealth sees the writing on the wall: It is a leading player in a steadily eroding business. As premiums climb ever higher, more companies are saying no to traditional health insurance. Just 66% of private full- time workers now have employer-sponsored health insurance, down from 80% in 1989, according to the Bureau of Labor Statistics. Though the U.S. economy has created 3.5 million jobs since 2000, the number of people with commercial health insurance hasn't budged.

3. UnitedHealth Group Inc. is at the leading edge of the latest trend sweeping the industry so- called ______. a. business-driven health care b. auto-driven health care

4. Just ______of private full-time workers now have employer-sponsored health insurance, down from 80% in 1989, according to the Bureau of Labor Statistics. a. 22% b. 44% c. 66% Correct d. 77%

Banker in Chief Bernanke Is Named to Lead the Fed By GREG IP October 25, 2005; Page A1 http://online.wsj.com/article/SB113016528392377572.html

WASHINGTON -- Ben S. Bernanke, an economist virtually unknown outside of academic circles four years ago, was picked by President Bush to succeed Alan Greenspan as chairman of the Federal Reserve Board, the most influential economic policy job in the world. The announcement represents a curtain call for an extraordinary 18 years in which Mr. Greenspan has guided the U.S. and, to a great extent, global economy -- by most accounts with much success. The transition thus has the potential to roil markets and unsettle investors, many of whom see Mr. Greenspan as a rock of stability for a U.S. economy afflicted by budget and trade deficits, high energy prices and heavy reliance on borrowing from abroad. Against that backdrop, the Bush administration made what appeared to be a safe choice, for itself and the economy. Mr. Bernanke (pronounced ber-NANK-ee), 51 years old, has been an academic most of his life and represents both continuity and minimal surprise on monetary policy. He was a member of the Fed board of governors alongside Mr. Greenspan from 2002 to this past June, when he became chairman of the President's Council of Economic Advisers. Mr. Bernanke's monetary policy is likely to look much like Mr. Greenspan's: an emphasis on low inflation as the central bank's primary goal; little appetite for trying to burst stock-market or real- estate bubbles; and monetary policy that relies on data and pragmatism, not ideology. "My first priority will be to maintain continuity with the policies and policy strategies established during the Greenspan years," he said yesterday. In his last several months at the Fed and his short time at the White House, however, Mr. Bernanke has been more sanguine about inflation than some Fed officials. "The stability in core inflation and inflation expectations does suggest that overall inflation is likely to return to levels consistent with price stability in coming quarters," he told the Joint Economic Committee of Congress last Thursday. Some in the markets say his warnings about the risk of deflation, or generally declining prices, during his early days as a Fed governor suggest he would be soft on inflation. But for most of Mr. Bernanke's Fed stint, inflation wasn't a concern of the markets or the Fed, as it is now. Moreover, as an academic and a Fed governor Mr. Bernanke has argued that the central bank should have an explicit target for inflation -- both to guide market expectations and to hold the Fed accountable to its goal of price stability. A target wouldn't necessarily stop inflation from rising, but would make it hard for the Fed to ignore or play down such a risk. The stock market rose sharply on news of Mr. Bernanke's nomination, though the bond market declined. Mr. Bernanke is likely to usher in an approach that involves somewhat clearer statements and

© Copyright 2005 Dow Jones & Company, Inc. All rights reserved. WSJ Professor Guide: Page 3 of 17 publicly enunciated rules for moving rates than seen in the Greenspan years. Mr. Greenspan has long relied on his own idiosyncratic understanding of economic data, his discretion to move rates when he thought necessary, and often opaque pronouncements. Early reviews of the choice of Mr. Bernanke, whom financial markets had made the favorite, were positive. Bill Dudley, chief U.S. economist at Goldman Sachs Group, called him "highly competent." Nariman Behravesh, chief economist at forecasting firm Global Insight, said the choice will "reassure global financial markets." Sen. Edward Kennedy, the Massachusetts Democrat, deemed him "certainly well- qualified." Mr. Greenspan, who the White House said participated in the selection process, gave his blessing, citing the nominee's "academic credentials and important insights into the ways our economy functions."

5. Ben S. Bernanke, was picked by President Bush to succeed Alan Greenspan as chairman of ______. a. the Federal Library Board b. the Federal Social Security Board c. the Federal Stock Board d. the Federal Reserve Board Correct

6. The stock market ______on news of Mr. Bernanke's nomination. a. rose Correct b. fell c. declined d. swayed

Northwest Targets Flight Attendants For Outsourcing By SUSAN CAREY October 26, 2005; Page A1 http://online.wsj.com/article/SB113029189328179595.html

Emboldened by its success in beating a mechanics strike with an army of replacement workers, Northwest Airlines is trying another hardball tactic against organized labor -- an outsourcing maneuver other airlines may be forced to copy. Part of the plan this time involves farming out some of the positions filled by senior flight attendants on coveted international routes. It's another sign that Northwest, which filed for bankruptcy-court protection last month, wants to become a "virtual airline," with all sorts of jobs previously claimed by organized labor outsourced to cheaper workers, some overseas. Earlier this month, Northwest told its bankruptcy-court judge that it will ask the court at a Nov. 16 hearing to cancel its current labor contracts if the unions don't agree by mid-November to new terms that would save hundreds of millions of dollars a year. The carrier also is trying to outsource pilot and ground-worker jobs. Not only is the airline asking the flight attendants for 17% pay cuts, it is proposing to have 75% of its flights across the Atlantic and Pacific and all of its flights between Amsterdam and India staffed by "regional flight attendants" who aren't currently members of the Professional Flight Attendants Association union. That's the group that represents Northwest's 9,800 U.S.-based flight attendants. Northwest also is seeking to move all the flight-attendant jobs on planes with 77 to 100 seats that fly in North America to attendants not on the PFAA seniority list, and to cut the number of U.S. flight attendants allowed to work on flights from Japan to the rest of Asia to

© Copyright 2005 Dow Jones & Company, Inc. All rights reserved. WSJ Professor Guide: Page 4 of 17 one from two. The seniority list ranks attendants according to hire date, and the ranking affects pay, assignments and other quality-of-life issues. Those intra-Asia flights are mostly staffed by nearly 700 Asian attendants from bases in Japan, China, South Korea, the Philippines and other countries. They operate under different pay and work rules but have language skills for Asian destinations as well as English. The current union contract allows this limited but longstanding outsourcing. Northwest is seeking cost savings of $195 million a year from the flight attendants through 2010. The airline, based in Eagan, Minn., and the nation's fourth-largest by traffic, said it hopes to achieve mutual agreements on concessions with all its unions except for the mechanics before the Nov. 16 hearing. It also said it remains open to suggestions from the unions on alternative ways to reach the cost-savings targets it has identified. No other U.S. airline has managed to take away most of the prized international flying normally awarded to the most senior attendants. If Northwest succeeds, its big rivals might be forced to follow suit simply to get their costs into line. Many U.S. attendants like overseas flights because they earn more, can pack more hours of work into fewer days and sometimes can enjoy longer layovers in attractive foreign cities. If Northwest took much of that work away, it would push veteran attendants into domestic flying and displace colleagues with less experience.

7. Northwest Airlines is trying an outsourcing maneuver to farm out some of the positions filled by senior ______on coveted international routes. a. pilots b. flight attendants Correct c. reservation agents d. flight cleaners

8. Earlier this month, Northwest told its bankruptcy-court judge that it will ask the court at a Nov. 16 hearing to cancel its current ______. a. labor contracts Correct b. credit cards c. debts d. travel plans

Demands for Labor Givebacks Grow More Aggressive By KRIS MAHER October 27, 2005; Page A1 http://online.wsj.com/article/SB113037878653280848.html

The tentative agreement between the United Auto Workers and General Motors Corp. to cut retiree health benefits is sending out ripples well beyond the auto world, potentially affecting labor negotiations in industries ranging from telecommunications to aerospace. Unions had already taken a sharp blow this year when Northwest Airlines broke a mechanics strike using nonunion workers. The carrier this week aired plans to seek cost concessions from flight attendants, pilots and ground crew as well. But the UAW-GM deal, which would shatter what is often considered the gold standard of union benefits, underscores not just the sharply waning power of unions but the pressures on both sides of any labor-management negotiation to adapt to tough economic realities. As global competition drives cost-cutting -- especially in health care -- and productivity gains squeeze the labor market, union leaders are increasingly

© Copyright 2005 Dow Jones & Company, Inc. All rights reserved. WSJ Professor Guide: Page 5 of 17 being cast in the role of selling concessions to rank-and-file members, while companies are becoming more aggressive in their demands. Labor experts believe many nonunion workers in pockets of the labor market that haven't already been forced to share costs for health care also will soon face greater demands to do so. An internal memo at Wal-Mart Stores Inc. explores hiring strategies that might be used to reduce health-care costs. "Big visible contracts cast a shadow over what happens at other companies, union and nonunion alike," says Harley Shaiken, a labor and economics professor at the University of California at Berkeley. The GM deal in part requires retirees to pay about a fifth of premium costs and raises drug co-payments for active workers. It has already reshaped discussions in the rest of the sprawling U.S. auto sector, with both car makers and parts suppliers watching the negotiations for signals on how their own talks with the UAW might proceed. Yesterday, DaimlerChrysler AG said it intends to lower its U.S. health-care costs by between 25% and 30% through talks with the union. DaimlerChrysler Chief Financial Officer Bodo Uebber, in a conference call with industry analysts and journalists, said the car maker is waiting to see details of GM's agreement with the union before starting its own negotiations. "We'll scrutinize General Motors' deal with the UAW and aim for similar conditions," Mr. Uebber said.

9. Labor experts believe many nonunion workers in pockets of the labor market that haven't already been forced to share costs for ______will soon face greater demands to do so. a. vacation time b. vision care c. dental care d. health care Correct

10. DaimlerChrysler AG said it intends to lower its U.S. health-care costs by between ______through talks with the union. a. 25% and 30% Correct b. 35% and 40% c. 10% and 15% d. 12% and 17%

Turkey in the Tank: High Price of Gasoline Is a Boon for Biofuels By PATRICK BARTA and SARAH NASSAUER October 28, 2005 http://online.wsj.com/article_print/SB113046685175882205.html

What comes out of a small refinery in Carthage, Mo., isn't unusual: up to 500 barrels a day of diesel fuel. It's what goes in that sets it apart: turkey feathers, turkey bones, turkey fat and sometimes even whole turkeys. With oil prices above $60 a barrel and pump prices soaring, drivers around the world are scrambling for alternative fuels. A little processing can make fuel out of all sorts of commodities, and today people are proving it not just with turkey-farm leftovers but with used cooking oil, coconut meat and cow dung. The Missouri diesel plant belongs to Changing World Technologies Inc., a West Hempstead, N.Y., company. It says its "thermal conversion process" is a speedier version of the geological drama that made petroleum -- crude oil being simply organic matter pressure-cooked under the earth's surface for millions of years. The difference is that this process uses turkey parts rather than the microscopic plants and

© Copyright 2005 Dow Jones & Company, Inc. All rights reserved. WSJ Professor Guide: Page 6 of 17 animals of yesteryear. Waste from a nearby turkey-processing plant goes in, heat and pressure separate oils and gases, and diesel comes out. The company sells the fuel to a nearby industrial facility to generate power. Chief Executive Brian Appel claims the turkey diesel is competitive with the petroleum-based stuff, thanks in part to recent U.S. tax incentives for renewable resources such as farm waste. Turkey oil, he declares, is "one of the most significant investments in the energy community" since the first commercial oil well was drilled in Pennsylvania in 1859. A spokesman for ConAgra Foods Inc., which holds a minority stake in Changing World Technologies, says the company is in a "wait and see mode" with respect to the turkey-to-oil venture. In the late 1800s, Rudolf Diesel himself envisioned a future in which farmers used everyday crops -- notably peanuts -- to fuel machines. Environmentalists have long touted the benefits of fuels made from renewable organic matter. These "biofuels" often burn cleaner than petroleum and could, if used extensively, push back the day when the world runs out of oil. The most familiar is "gasohol," gasoline blended with alcohol made from crops like corn or sugar cane.

11. Changing World Technologies Inc uses ______for its "thermal conversion process". a. garbage b. chicken parts c. turkey parts Correct d. horse parts

12. The output of the Changing World Technologies Inc process is ______. a. starch b. gasoline c. diesel Correct d. tofu

Questions 13 – 17 from Marketplace

Countries Question U.S. Control of Internet By CHRISTOPHER RHOADS October 25, 2005; Page B1 http://online.wsj.com/article/SB113019875405778267.html

Growing number of countries, including China, Brazil, India and Cuba -- as well as the European Union -- are questioning U.S. control over the Internet. The Internet is managed by a nonprofit private organization called the Internet Corporation for Assigned Names and Numbers, or Icann, set up by the U.S. Department of Commerce in 1998 and based in Marina del Rey, Calif. Icann has an international advisory body, but the U.S. government retains veto power over all decisions -- such as the creation of new Web domains. Icann oversees domain names, a database of Web addresses and other standards. Such measures ensure, for example, that a user plugging in a Web address will connect to a single Web site with that name. Though arcane and out-of-view of users, the procedures are critical to making the Internet work.

13. Growing numbers of countries, including China, Brazil, India and Cuba as well as the European Union are questioning US control over the ______.

Japan's Diversity Problem By GINNY PARKER WOODS October 24, 2005; Page B1 http://online.wsj.com/article/SB113010385361476986.html

TOKYO -- U.S. computer giant Hewlett-Packard Co. knows firsthand the challenge of promoting women to management positions in Japan. Throughout the company's global operations, women hold some 20% of managerial posts. In the U.S., that figure is over 25%. But in Japan, women occupy fewer than 4% of H-P's management jobs -- so low, in fact, that "we had to do something," says Akiko Kawai, an H-P manager in charge of a new company program to promote Japanese women. To motivate female employees, Ms. Kawai organized a support group that encourages women to discuss topics like communication skills, time management and balancing work and family life. As a mentoring effort, H-P has also paired up-and-coming women with high-ranking managers -- most of whom by definition are men. One male mentor, Masaru Someya, a marketing director, says of the woman he worked with: "She was very highly skilled, but she didn't realize how good she was." That professional women lack confidence is just one of the reasons why Japan -- the world's second-largest economy and home to large, global companies like Toyota Motor Corp. and Sony Corp. -- lags far behind other nations when it comes to promoting women in the workplace. The dearth of Japanese women in managerial roles even goes well beyond the challenge of balancing work and home life -- an issue that confronts female corporate ladder-climbers around the globe. In Japan, professional women face a set of socially complex issues -- from overt sexism to deep-seated attitudes about the division of labor -- problems that are not easily reversed.

14. In Japan, women occupy ______of Hewlett-Packard Co. management jobs. a. less than 4% Correct b. 20% c. more than 25% d. 37%

One Pro Golfer Fights Tour's Pension Rules By CHRISTOPHER CONKEY October 26, 2005; Page B1 http://online.wsj.com/article/SB113029326722179618.html

Superstar Tiger Woods and lesser-known Steve Haskins play professional golf in tournaments organized by the nonprofit PGA Tour Inc. But the golf association will treat the two players, both independent contractors, much differently in retirement. Mr. Woods, a Tour member since 1996, stands to get millions of dollars from a Tour-funded pension. Mr. Haskins, a member since 1990, won't get a penny. The reason: The Tour's performance-based pension system handsomely rewards stars on the more elite PGA Tour circuit but does nothing for also-rans like Mr. Haskins,

© Copyright 2005 Dow Jones & Company, Inc. All rights reserved. WSJ Professor Guide: Page 8 of 17 who toils on the less-prestigious Nationwide Tour. Now Sean Murphy, a 40-year-old player who is taking a break from golf while recovering from surgery, is fighting an uphill battle to change the system. For the past 18 months, Mr. Murphy has waged an impassioned campaign to get the Tour to offer pension benefits to every player on its three main circuits: the famous PGA Tour, the second-string Nationwide Tour and the Champions Tour for seniors 50 years of age and older. He has debated the issue with Tour officials, argued his case at a players' meeting in Erie, Pa., and has been pressing his cause in Congress. Mr. Murphy, who has played on both the PGA Tour and the Nationwide Tour, will be eligible to receive hundreds of thousands of dollars in pension money when he retires. Still, he calls the system discriminatory and says it goes against the Tour's stated mission "to substantially increase player financial benefits." He also asserts that it violates IRS rules for nonprofits by offering pensions to some independent contractors but not to others. Ron Price, the Tour's chief financial officer, strongly defends the pension plans, saying they comply with IRS regulations for nonprofits. Tour spokesman Bob Combs says Nationwide Tour players aren't offered pension benefits because that tour, unlike the PGA and Champions tours, isn't intended to be a long-term career destination. "The vast majority of the guys either graduate to the PGA Tour or more or less drop off the scene," Mr. Combs says. "It was created as a place for guys to hone their games and prepare for the next level." The Tour funds four primary pension plans with assets totaling $387 million. PGA Tour players are eligible for three plans, Champions Tour players are eligible for one and Nationwide Tour players are shut out altogether. The vesting periods vary for each. PGA Tour players are eligible for pension benefits after four or five years, while Champions players can fully vest in as few as 12 tournaments.

15. Sean Murphy is fighting a battle with the PGA Tour to create fairness regarding what element of work life? a. retirement pension Correct b. equal pay for women c. equal treatment for “Diversity” groups d. age discrimination

Can Employers Alter Hiring Policies to Cut Health Costs? By ANN ZIMMERMAN, ROBERT GUY MATTHEWS and KRIS HUDSON October 27, 2005; Page B1 http://online.wsj.com/article/SB113036976015880610.html

An internal Wal-Mart Stores Inc. memo proposing that the retailer cut its health-care costs by discouraging unhealthy people from applying for jobs raises questions about how far employers can legally go in preferential hiring. Health-care costs are soaring, and employers are all too aware that relatively few workers are responsible for a significant chunk of those costs. Federal law prohibits not hiring workers because of disabilities, age or race. But whether or not employers can screen out other groups -- say, the obese -- is more of a gray area. The Wal-Mart memo to the company's board of directors proposes incorporating physical activity in all jobs to discourage the infirm from applying. For example, the memo suggests that Wal-Mart arrange for "all cashiers to do some cart gathering." The memo also promotes health-savings accounts, which are funded by workers' pretax dollars and can be diverted to retirement accounts or rolled over to pay for health care the following year. Health-benefits specialists say these accounts are most appealing to younger, healthier workers. "It will be far easier to attract and retain a

© Copyright 2005 Dow Jones & Company, Inc. All rights reserved. WSJ Professor Guide: Page 9 of 17 healthier work force than it will be to change behavior in an existing one," says the memo, which was previously disclosed in the New York Times yesterday. "These moves would also dissuade unhealthy people from coming to work at Wal-Mart." With health-care costs rising an average of 15% a year since 2002, corporations are increasingly concluding it will be difficult to make headway without addressing the minority of employees who account for the majority of health-care costs. Health-care company WellPoint Inc., says that of its 29 million customers, 7% account for 63% of the company's medical costs. Companies initially tried to rein in costs by providing incentives to employees to change their lifestyles, including offering free gym memberships and on-site smoking-cessation programs. Recently, however, companies have become more punitive. General Mills Inc., for instance, imposes a $20 a month surcharge on the health benefits of smokers. Union Pacific Corp. weeds out potential high-cost workers by not hiring smokers in states where it is legal to do so. And Northwest Airlines recently told employees that next year a surcharge will be assessed "on those employees/spouses/domestic partners who use tobacco products." The Wal-Mart memo seems to go beyond that by focusing on the hiring process. Susan Chambers, Wal-Mart's executive vice president of benefits and the memo's author, says Wal-Mart isn't trying to discourage the unhealthy from working there but to encourage the work force to be healthier. The shopping-cart example, she says, "is a way to encourage more physical activity." But some workers' groups don't it see it that way. "When you add physical requirements to jobs that don't need them, you begin to weed out a whole pool of people such as the elderly, the obese, people with pre-existing medical conditions," says Andrew Stern, president of the Service Employees International Union, which represents 1.8 million workers, including health-care workers, janitors and security guards. "I think this memo steps over the line of what's legal," he adds. But employment lawyers and health consultants maintain that exactly what employers can and can't do to insure a healthy work force falls into a legally unsettled area. "It is a danger zone when you start depending on stereotyping," says Jennifer Rubin, an employment attorney for the firm of Mintz Levin. "If an employer reaches a conclusion that they are not going to hire an applicant because they perceive that the applicant is unhealthy or old, it is a potential violation of federal and state laws."

16. Employment lawyers and health consultants maintain that exactly what employers can and can't do to insure a healthy work force falls into a legally ______. a. well defined area b. unsettled area Correct c. smoking hot area d. stereotyped area

SBC's Embrace of AT&T Brand Brings History -- and Baggage By DIONNE SEARCEY and BRIAN STEINBERG October 28, 2005; Page B1 http://online.wsj.com/article_print/SB113041435841581110.html

Does the AT&T name still have enough oomph behind it to reach out and touch someone? SBC Communications Inc. thinks so. The company confirmed that it would adopt AT&T Corp.'s moniker as its new name once its $16 billion takeover of AT&T is complete. The U.S. Department of Justice yesterday approved the takeover, and Federal Communications Commission officials could do the same as soon as today.

© Copyright 2005 Dow Jones & Company, Inc. All rights reserved. WSJ Professor Guide: Page 10 of 17 17. SBC Communications confirmed that it would adopt ______moniker as its new name once its $16 billion takeover is complete. a. AT&T Corp.'s Correct b. CBS Corp.'s c. NCR Corp.'s d. NPR Corp.'s

Questions 18 – 23 from Money & Investing

Decoding New Health Plans By VANESSA FUHRMANS October 22, 2005; Page B1 http://online.wsj.com/article/SB112993961219776399.html

This fall, millions of Americans for the first time will face a controversial new health-insurance option -- one that claims high deductibles are good for you. Known as consumer-directed health plans, the idea is that patients will be encouraged to bargain-hunt for medical care. After all, the high deductible means more of their money is now at stake. Employers are adopting these plans as an option for their employees in an effort to cut spiraling corporate health-care costs. As a result, in coming weeks, which is the time of year when employees traditionally pick coverage for the next year, consumer-directed plans are poised to hit the mainstream. Some 26% of U.S. companies with 500 or more employees say they are likely to offer the high-deductible plans next year, up from 14% who were planning to do so a year ago, according to a recent nationwide survey by Mercer Health & Benefits LLC, a health-care consulting group based in New York. "This is the year a much broader number of employers are going to expose people to these choices," says Michael Thompson of PriceWaterhouseCoopers' global human-resource-services practice. For consumers, this adds an extra layer of complexity to what is already one of the most significant benefits decisions of the year. The advantage of these plans for individuals is that annual premiums can be considerably lower, in some cases as little as one-third the cost of traditional insurance coverage. The downside: It is possible that you will end up shelling out considerably more each time you seek medical care. To help cover the higher deductible, the employee can in some cases put pretax money into a special savings account that the employee can tap to meet the deductible. After the deductible is met, traditional insurance coverage kicks in, usually with the employee picking up 10% or 20% of costs until the out-of-pocket maximum is reached. Adding to the challenge, the health-care savings accounts come in different flavors that can have important ramifications for consumers. The newer versions, known as health savings accounts, or HSAs, came into existence in 2004 and are largely employee-funded, although some employers also contribute. More significantly, they are portable -- meaning employees can take the funds with them when they quit or go to new jobs. By contrast, earlier- generation health reimbursement accounts, or HRAs, are funded solely by the employer and stay with the employer if the employee leaves the company.

18. Health savings accounts, or HSAs, came into existence in 2004 and are largely employee- funded, although some employers also contribute. More significantly, they are ______. a. portable Correct

Be Happy October 25, 2005; Page C1 By JUSTIN LAHART http://online.wsj.com/article/SB113019851890078259.html

All in all, people should be less mopey than they were in September. Not only have feelings about the botched response to Hurricane Katrina gotten a little less visceral, the economy seems to have weathered the storm relatively well. Away from the suffering auto sector, retail sales have been brisk and the hurricane appears to have little effect on company results. Gasoline prices have fallen. And yet consumers remain glum. Earlier this month, the University of Michigan's sentiment index, rather than bouncing from its September drop, unexpectedly fell further. Economists surveyed by Dow Jones Newswires and CNBC estimate that today's Consumer Confidence Index from the Conference Board will come in at 88, just a slight rise from September's 86.8. Part of the problem is that after Katrina scudded off the news it was replaced by other storms. Those other storms haven't matched Katrina for destruction, but they have caused plenty of angst. Worries over rising inflation appear to be eating away at confidence, and the various "gates" embroiling Washington haven't helped. Another weak consumer-confidence report wouldn't, in itself, be all that worrisome. Americans seem to spend regardless of their mood -- it's only when they start worrying about their jobs and financial security that they get jittery. To that end, it is almost always more interesting to see what the respondents to the Conference Board's survey have to say about the job outlook than it is to watch the overall level of consumer confidence. In the September survey, consumers who thought jobs were "hard to get" increased to 25.4% from 23.1%. Those who said jobs were "plentiful" fell to 20.1% from 23.6%. This seemed inconsistent with the Labor Department's September jobs report, which suggested that there was strong jobs growth outside of hurricane- hit areas. But Merrill Lynch's economists point out that a recent state-by-state tally of jobs suggests that, outside of states affected by Katrina and the strike at Boeing, far fewer jobs were created than the Labor Department first reported. The implication is that last month's consumer- confidence report gave a better read on the jobs environment than the employment report did.

19. Economists surveyed by Dow Jones Newswires and CNBC estimate that the Consumer Confidence Index from the Conference Board will ______from September's 86.8. a. slightly rise Correct b. rise significantly c. slightly fall d. fall significantly

In Slow Drive By THEO FRANCIS October 24, 2005; Page C1 http://online.wsj.com/article/SB113010380398076984.html

© Copyright 2005 Dow Jones & Company, Inc. All rights reserved. WSJ Professor Guide: Page 12 of 17 Hurricanes understandably grab headlines for their human and economic impact. Wilma is, it's hoped, the last in this year's lineup. But for Allstate Corp. and other personal-lines insurers, a different issue looms: whether, storms aside, the good times can continue to roll in their auto businesses. Part of the answer may hinge on old habits and the price of oil. Will skyrocketing gasoline keep Americans off the road, thus reducing accidents? Investors need something new to boost the auto insurers' profit margins, given how many things already have boosted them. Car insurers like Allstate, which gets more than half of its profits from its auto business, have had a very good run in recent years. Allstate shares are up more than 30% over the past two years, far outpacing the broader market. It and its rivals have gained from tougher enforcement of drunken- driving laws, new restrictions on teenage driving, safer cars and better highways. Since Katrina hit Aug. 29, Allstate shares have dropped about 7%. Net losses from the storm led the company last week to post a third-quarter loss of $1.55 billion. The shares would be down more, but many investors are optimistic that Allstate will be successful in getting the rate increases it says it will seek for its homeowners' policies in Gulf states, while it also pares its book of business in the hurricane-prone area. But those rate increases are far from a sure thing. State regulators are under tremendous pressure to look out for hard-hit consumers. And "at some point, affordability becomes an issue," says Morgan Stanley analyst William Wilt. Already, the average Gulf Stater is paying a third more for homeowners' insurance than in 1999, his figures show. Allstate CEO Edward Liddy told analysts last week in a conference call that, "if push came to shove," the company could pull out of states that don't approve needed increases. But abandoning policyholders isn't always easy. Mr. Liddy predicted "some intense debates" down the pike. So, will gas-pump sticker-shock keep motorists off the road -- and boost insurers' profits? For now, it's mostly speculation, Mr. Liddy said in the call. In their earnings call, Safeco Corp. executives held out less hope: They said they have yet to see signs of reduced driving -- or any indication from past records that it's likely to happen.

20. Allstate and other insurers who make a significant profit from auto insurance have made more money recently due to ______. a. enforcement of drunken-driving laws b. new restrictions on teenage driving c. safer cars and better highways d. all of the above Correct

The Real World: Profits October 26, 2005; Page C1 By JUSTIN LAHART http://online.wsj.com/article/SB113028560918279418.html

They may not be squeaky clean, but the profits that companies are publicizing these days are a lot closer to the real bottom line than they used to be. Three years ago, with companies in the midst of a restructuring binge aimed at fixing the mistakes of the bubble era, investors became keenly aware of what became known as the "GAAP gap." That's the difference between net income under generally accepted accounting principles and so-called pro forma earnings, which could exclude the costs of everything from closing a factory to recruiting a new CEO. The uproar over companies' use of pro forma, which long had been habitual but never so out of hand, led to a new rule requiring that companies' news releases reconcile pro forma earnings with GAAP. At

© Copyright 2005 Dow Jones & Company, Inc. All rights reserved. WSJ Professor Guide: Page 13 of 17 the same time, more investors pressed companies and the analysts who followed them to stick with GAAP figures. Last year, pro forma earnings for companies in the Standard & Poor's 500- stock index, as compiled by Thomson Financial, were 14% higher than GAAP earnings. In 2002, they were about 75% higher. But the good (well, better) behavior may have more to do with a friendly economic environment than anything else. When business is good, there are fewer things to sweep under the rug. ING Investment Management quantitative analyst Paul Bukowski points out that companies also can increase earnings by tweaking balance-sheet items such as inventories, accounts payable and accounts receivable. A company that is slow to record bad debt, for instance, boosts profit margins. Mr. Bukowski's research shows that the use of such "accruals" to boost earnings, which fell out of fashion after the accounting scandals of a few years ago, is on the rise. All told, he finds that, over the past year, 72% of the companies in the Russell 1000 index boosted earnings through either pro forma accounting or accrual adjustments, compared with 79% in early 2002. He also found that the companies that used such earnings boosters the most tended to be the ones whose shares had been producing the worst returns. "They'll do anything to not make themselves look like a falling knife," Mr. Bukowski says.

21. The profits that companies are publicizing these days are a lot closer to the real bottom line than they used to be. a. True Correct b. False

Fair Facts By IAN MCDONALD October 27, 2005; Page C1 http://online.wsj.com/article/SB113037406582880731.html

One thing for certain you can say about Fairfax Financial Holdings' stock: Somebody is going to lose on it -- you just don't know whether it will be its fans or foes. The Toronto insurance holding company is expected to report its quarterly results after the market closes today. Given an expected $388 million in pretax losses from Hurricane Katrina alone, expectations are low. But the company is caught up in tempests beyond Gulf Coast weather. Fairfax Financial is perhaps best known for its barbelled constituency on Wall Street -- with rabid "longs" betting on a rise, and shorts betting otherwise, and seemingly few in between. Among the optimists: Southeastern Asset Management and Cundill Investment Research, which together own almost 40% of Fairfax's thinly traded shares on the New York Stock Exchange (the stock trades in its home market of Toronto, too). As for critics, the stock has a 15% short interest, compared with 1% or 2% for the average NYSE stock. Despite enviable investment returns, the company, which has U.S. insurance units, has set itself a tough task in using income from underwriting and investments to pay off money-losing policies written by businesses it acquired in years past and the debt it took on to buy those outfits. Meantime, the Securities and Exchange Commission and U.S. Attorney's Office in New York are probing the firm's use of "finite-risk" reinsurance, according to company filings. Some firms have used these pacts to polish their results. The SEC also is probing trading in Fairfax securities. Since the prosecutors' interest first surfaced on Oct. 10, Fairfax shares are down more than 17%. A company spokesman declined to comment. Fairfax has said it "has not been advised that it is the target of an investigation" by federal prosecutors. Bulls believe the company, which has extended the due date on much of its debt

© Copyright 2005 Dow Jones & Company, Inc. All rights reserved. WSJ Professor Guide: Page 14 of 17 until 2012, is wrongly maligned and instead is trucking toward hefty profits after raising $300 million in a stock offering early this month. The bears say Fairfax eventually could face a cash crunch, and they decry the company's labyrinthine structure. "You have all the shorts on one side of the field and a group that really believes in the firm on the other side," says Justin Fuller, a stock analyst at Morningstar Inc. "Quarter after quarter, both sides wait for someone to blink."

22. Fairfax Financial Holdings' is expected to report ______in pretax losses from Hurricane Katrina. a. $38 million b. $88 million c. $188 million d. $388 million Correct

One to Grow On By JUSTIN LAHART October 28, 2005; Page C1 http://online.wsj.com/article_print/SB113045154267081762.html

GDP is supposed to stand for gross domestic product. Today, it's more like guessing domestic product. Despite the hurricanes and a kick-up in energy prices, it looks like the economy grew strongly in the third quarter. Economists surveyed by Dow Jones Newswires and CNBC reckon that today's report from the Commerce Department will show that, adjusting for inflation, GDP grew an annualized 3.6%. For economists, the tricky thing about coming up with accurate estimates is that they have to use incomplete data to come up with any number of assumptions. Making this even trickier, because the Commerce Department lacks September business inventories and trade figures, it will be making assumptions of its own. And inventories and trade both got roiled in September.

23. GDP is supposed to stand for ______. a. guessing domestic product b. gross domestic product Correct c. goods done poorly d. goods done purposefully

Questions 24 – 26 from Personal Journal, Section D

Car Makers Forced To Pile On More Discounts By GINA CHON October 25, 2005; Page D1 http://online.wsj.com/article/SB113019418212278130.html

Car companies are having a hard time weaning buyers off of big discounts. After this summer's sales bonanza driven by employee-pricing discounts, domestic auto makers had been hoping to boost profits by reducing the widespread discounting. But with sales soft, they are now returning to costly incentives. The latest discount wrinkle is in the form of free gas. General Motors Corp. this month began switching to so-called value pricing that lowers sticker prices and cuts back on

© Copyright 2005 Dow Jones & Company, Inc. All rights reserved. WSJ Professor Guide: Page 15 of 17 cash discounts. But when sales slumped in October, GM began offering $500 gas cards to buyers of its sport-utility vehicles and $500 rebates on 2006 full-size pickup trucks. Certain 2006 models received higher rebates, including $2,500 cash back for Buick Rendezvous and $3,500 cash back on the Chevrolet Tahoe. In recent days, Ford Motor Co. has resorted to offering zero- percent financing or up to $5,000 cash back to boost sales of some 2005 models. Now some Ford dealers in the Chicago area are throwing in up to $750 in free gas. Ford is also offering discounts on some 2006 models, such as $2,000 cash back on the Explorer and $1,500 cash back on the Escape. DaimlerChrysler AG's Chrysler Group is also offering zero-financing deals and up to $5,000 cash back on both 2005 and 2006 models. The Town & Country for 2006 comes with $2,500 cash back or zero financing for 36 months, while the Dodge Durango and Ram 1500 for 2006 has a $5,000 cash-back offer or zero financing for 36 months.

24. Value pricing generally works out to be a better deal for consumers, mainly because it __. a. always gives the consumer the best deal possible b. gives the vehicle a higher resale value and in many cases includes extra features without extra costs. Correct c. it gives the consumer lots of room to haggle on price d. ensures free gas for the first month of ownership

Counting on Getting an Inheritance? Better Make Other Retirement Plans By KELLY K. SPORS October 26, 2005; Page D1 http://online.wsj.com/article/SB113027583469179186.html

If you're counting on an inheritance from your parents to rescue your under funded retirement plans, you could be playing a very dangerous game. Despite predictions of a massive transfer of wealth between generations, many baby boomers can expect to get little or nothing from their parents. Economists and financial experts can't agree on how much money baby boomers and their offspring are likely to inherit, and their predictions of the total sum involved vary widely. But many agree that wealthy families are far more likely to receive a windfall, and that many other would-be heirs will end up disappointed. About 64% of those who receive bequests of $100,000 or more are already well off, ranking in the top quintile of net worth, according to an AARP study analyzing the Federal Reserve Board's 2001 Survey of Consumer Finances, the most recent figures available. The median inheritance baby boomers received was about $48,000, but 83% of them said they'd received no inheritance to date. "It's fair to say that expectation is greater than reality," says Paul G. Schervish, director of Boston College's Center on Wealth and Philanthropy. The Center estimates that at least $45 trillion will be left over the next five decades, though others argue that projection is too high. For those who do inherit something, it's often not as bountiful as they hope. A big portion of large estates goes to pay taxes and is bequeathed to charities, according to Mr. Schervish. And there are some hints that the inheritance pie may get sliced even thinner. • Living longer. Increasing longevity is a primary reason for many of today's inheritance letdowns. A 65-year-old man today is expected to live to age 81, while a 65-year-old woman should live until 84 -- nearly two decades beyond typical retirement age. Most wealth goes to a surviving spouse before it reaches children or grandchildren, so some heirs are well into retirement themselves by the time an inheritance

25. It is risky to count on receiving large amounts of inheritance money because ___. a. large portions of estates go to pay taxes or are bequeathed to charities b. people are living longer and the money is being used for nursing home costs c. your wealthy Uncle may have a debt you don’t know about d. both a &b Correct

Separation Anxiety: Short Job Transfers Create Problems for Families Left Behind October 27, 2005; Page D1 By SUE SHELLENBARGER http://online.wsj.com/article/SB113036215207480415.html

Monika Byrd, Jackson, Miss., said goodbye last month to her husband Shane, a sales manager, as he left for what was to be a four-week assignment in Chicago. Ms. Byrd picked up the slack at home, curtailing travel for her own job and doing all the chores Shane usually does. To help her 12-year-old son through his stepfather's absence, she talked with him often about Shane. Then, the assignment was extended to two months. "You take a deep breath and say, 'What does this mean?' " says Ms. Byrd, a curriculum specialist for a nonprofit educational organization. "We have to adjust and plan." Welcome to the shifting sands of short-term corporate transfers. Short-term assignments are hot: Instead of relocating employees and their families for two years or more, some employers are reducing transfers, both in the U.S. and overseas, to several weeks to 12 months, and leaving the family behind, according to several surveys of relocation trends. While the trend has benefits, it's also raising unforeseen problems for many families. Some 28% of international transferees went overseas for a year or less in 2004, up from 10% in 2000, says a survey set for release soon by GMAC Global Relocation Services, the National Foreign Trade Council and the Society for Human Resource Management. A survey this year of 203 companies by PricewaterhouseCoopers says short-term assignments to many parts of Asia and Europe are expected to rise by 30% to 50% in the next two years. Although no one tracks the length of domestic postings, short-term U.S. transfers also are increasingly common, relocation consultants say. Short-term assignments handled by American International Relocation Solutions, Pittsburgh, which moves employees, administers relocation benefits and oversees daily services and housing for transferees of Fortune 500 multinational companies, are definitely rising, says Patrick White, managing director. Shorter postings reduce costs for employers and eliminate the strain of uprooting spouses and children. The average yearly cost of long-term transfers is three times the annual salary of the transferee; if the whole family goes along, "a three-year assignment can easily cost $1 million," says Scott Sullivan, a senior vice president, GMAC Global. Short-term assignments also avoid the security risks families might face in foreign locations.

26. Short–term corporate transfers ______. a. are often a lot more expensive than long-term transfers b. relocate employees without their families for up to 18 months Correct c. are known for reinforcing strong families and helping shaky marriages d. are a next best thing to a paid vacation