The Key Difference Between Defined Benefit and Defined Contributions Post-Employment

question 21

Multiple Choice

The key difference between defined benefit and defined contributions post-employment plans is that:

• A) the employee bears the risk in a defined benefit plan, whereas the employer bears the risk in a defined contribution plan
• B) the fund bears the risk in a defined benefit plan, whereas the employee bears the risk in a defined contribution plan
• C) the employer bears the risk in a defined benefit plan, whereas the employee bears the risk in a defined contribution plan
• D) the employer bears the risk in a defined benefit plan, whereas the fund bears the risk in a defined contribution plan

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Definitions:

Bank Loan

A sum of money lent by a bank to a borrower at a defined interest rate for a specified period.

Long-term Loan

A loan that is extended over a lengthy period, exceeding a year, used for significant business investments or personal purchases.

Instalment Payments

A payment plan allowing a debt to be paid off in specific, scheduled portions over a set period of time.

Interest Portion

The part of a payment or financial operation that represents interest, separate from principal repayment or other components.