Which of the Following Statements About the Guaranteed Purchase Option

question 39

Multiple Choice

Which of the following statements about the guaranteed purchase option is true?

• A)An insured usually has 24 months to exercise an option.
• B)The option cannot be exercised until the insured reaches age 40.
• C)The amount of life insurance that can be purchased at each option is limited to 10 percent of the face amount of the basic policy.
• D)The additional coverage can be purchased without demonstrating insurability.

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Definitions:

Simple Rate of Return

A financial metric that measures the efficiency of an investment as the annual income divided by the initial investment cost.

Time Value of Money

The principle that a sum of money is worth more now than the same sum in the future due to its potential earning capacity.

Payback Method

A method of investment appraisal that calculates the time required for the cash inflows from a project to repay its initial investment cost.

Capital Budgeting

The process of planning and managing a company’s long-term investments in major projects or assets, evaluating profitability and risks.