Paul Is Shopping for a Life Insurance Policy

question 35

Multiple Choice

Paul is shopping for a life insurance policy.An agent asked Paul if he would like to purchase a participating policy.What is a "participating" policy?

• A)a policy which has a cash value
• B)a policy which pays dividends
• C)a policy which invests in common stock
• D)a policy which provides for an increasing death benefit

---

Definitions:

Flotation Costs

Expenses incurred by a company in issuing new securities, including underwriting fees, legal costs, and registration fees.

Debt/Equity Ratio

The ratio that outlines the distribution of financing between debt and equity for company assets.

Cost of Equity

The rate of return that shareholders require on their investment in a company, influencing how much a company should pay to finance its equity.

Pre-Tax Cost of Debt

The rate of return that a company pays on its debt before taking into account taxes.