MM Exam #4 Question 3-E AM

[Codtrawler87]

The question asks for 2 reasons why Plan’s current allocation may lead to an erosion of the funded surplus.

I wrote that the duration mismatch between asset portfolio and liabilities portfolio can cause an erosion of the surplus. On the answer sheet, duration mismatch was not mentioned. Why/how is my answer wrong?

[S2000magician]

It might not be.

Guideline answers generally aren’t exhaustive.

[Mattyj7183]

@S2000magician

It might not be.

Guideline answers generally aren’t exhaustive.

Hi Bill - If guideline answers aren’t exhaustive, how would you propose that we score ourselves when we come across these kinds of situations?

[S2000magician]

@Codtrawler87

The question asks for 2 reasons why Plan’s current allocation may lead to an erosion of the funded surplus.

I wrote that the duration mismatch between asset portfolio and liabilities portfolio can cause an erosion of the surplus. On the answer sheet, duration mismatch was not mentioned. Why/how is my answer wrong?

I believe that your answer is reasonable.