Question: 7 . A defined benefit pension plan is 5 5 % invested in equities and 4 5 % in bonds. During a certain year, interest

7. A defined benefit pension plan is 55% invested in equities and 45% in bonds. During a certain year, interest rates fall by 150 basis points (1.5%) and equity prices increase by 5%. Discuss the likely effect of this on the pension plan.

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