Which of the Following Statements Is (Are)true with Respect to the Cash

question 28

Multiple Choice

Which of the following statements is (are) true with respect to the cash (lump sum) annuity settlement option?
I.The taxable portion of the distribution is subject to federal and state income taxes.
II.The option results in adverse selection against the insurer as those in poor health are more likely to take cash than to annuitize the funds.

• A)I only
• B)II only
• C)both I and II
• D)neither I nor II

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Definitions:

Interest

This refers to the cost of borrowing money, expressed as a percentage of the borrowed amount, payable to the lender at a specified rate and time.

Original Investments

The initial amount of money invested in a project or business by its owners or investors.

Net Income

Net income refers to the total earnings of a company once all costs, expenses, and taxes are deducted from its total revenue.

Salary Allowances

Specific amounts designated for employees that are over and above their standard salary, often for specific purposes like housing, transportation, or special duties.