With an asset mix of 10% money market, 40% fixed income, and 50% equities, which investment is at the most inflation risk?

The correct choice is that the annuity has the most inflation risk because it has the longest term. Annuities typically lock in payments for a fixed duration, and if inflation rises during that term, the purchasing power of those payments diminishes significantly. This long-term commitment means that any increase in inflation will erode the real value of the payments received by the annuitant.

In contrast, investments like government bonds, particularly those with shorter terms, are less exposed to inflation risk because they have a quicker turnover. When these bonds mature, the investor can reinvest the proceeds into new bonds that might offer better returns in a higher inflation environment. Therefore, the longer the term an investment is locked into a fixed rate, the more susceptible it is to the negative effects of rising inflation on its real return.

This understanding highlights the importance of assessing the term structure and type of investment when considering inflation risks, especially in the context of long-term financial products like annuities.