As Can Be Learned from the Chapter, a Redemption Agreement

question 31

Multiple Choice

As can be learned from the chapter, a redemption agreement is the covenant, in which:

• A) The business owns insurance policies on the owners and is obligated to use the proceeds to purchase each stockholder's equity upon his or her death.
• B) Each owner is required to take out insurance on the others and to buy a proportional amount of the deceased's equity.
• C) Business assets, such as inventory or marketable securities, equal to the value of owner's share of the equity in the company will be transferred to relatives upon his or her death.
• D) Internal Revenue Service allows installment tax payments to be received within 2 years after an owner's death.
• E) None of the above.

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Definitions:

Wage Increase

An upward adjustment in the amount of money that workers are paid per hour, day, or work performed.

Labor Supply

The total hours that workers wish to work at a given wage rate.

Leisure

Time free from work or duties, which can be used for relaxation, recreation, or personal activities that one enjoys.

Income Effect

The adjustment in income of an individual or an economic system, and its effect on how much of a good or service is demanded.