Discount rate effect on Pension fund and insurance company assets/liabilities
I’m confused about the discount rate effect on the assets and liabilities of pension fund, insurance company and endowment fund.
From the CFA official practice qns answers -
- A fall in discount rate increases the PV of pension benefit obligations but not the MV of assets.
- If interest rates rise, the MV of portfolio assets will decline for insurance companies.
Could someone explain the discount rate relationships for pension fund, insurance company and endowment funds?
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