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Answer: Surplus at risk
## Explanation The correct answer is **Surplus at risk** (Option A). **Key Reasoning:** - **Surplus at risk** measures the potential shortfall between pension plan assets and liabilities over a given time horizon - It specifically addresses the concern about assets underperforming liabilities in defined benefit plans - **Option B** (Redemption risk) relates to the inability to redeem investments, not asset-liability mismatch - **Option C** (Maximum drawdown) measures the peak-to-trough decline in asset value, not the gap between assets and liabilities Surplus at risk is particularly relevant when assets (equity/real estate) have different risk characteristics than liabilities, creating potential funding shortfalls.
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65. A sponsor of a defined benefit pension plan is concerned that the plan assets invested heavily into equity and real estate do not match those of the pension liabilities. Which of the following best estimates how much the assets might underperform the liabilities?
A
Surplus at risk
B
Redemption risk
C
Maximum drawdown
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