Discuss Finra Series-6 Exam Topic 1 Question 12

The subaccounts into which Mr. Sumrisk directed his variable life premiums have earned a 6% return. If the assumed interest rate was 7%:

i. the cash value of his policy increased.

ii. the death benefit associated with his policy decreased.

iii. the cash value of his policy decreased.

IV. the death benefit associated with his policy increased.

Aboth I and II

Bboth I and IV

Cboth II and III

Dboth III and IV

Suggested Answer: A

If Mr. Sumrisk's subaccounts earned a 6% return and the assumed interest rate was 7%, then the cash value of his policy increased, but the death benefit associated with his policy decreased. The cash value of the policy increases when the separate account earns a positive return, regardless of the size of that return. The death benefit, however, depends on both the return earned on the separate account and the assumed interest rate. Since the separate account returned less, in this case, than the assumed interest rate, the death benefit decreased.

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11 comments · newest first

Noelia 1 year ago

So, does that mean the policy is still a good investment?

Nohemi 1 year ago

I agree, both I and II make sense here.

Troy 1 year ago

Wait, how can the cash value increase if the interest rate was lower?

Rashida 1 year ago

I think the death benefit would actually decrease, right?

Freeman 1 year ago

Cash value definitely increased with a 6% return!

Youlanda 1 year ago

I vaguely recall that the death benefit can increase if the cash value is doing well, but since the return is lower than expected, I think it might be option C.

Cary 1 year ago

If the cash value decreases, wouldn't that typically mean the death benefit also decreases? I feel like I need to double-check that.

Garry 1 year ago

I think I practiced a similar question where a lower return led to a decrease in cash value, so I might lean towards option III.

Gladys 1 year ago

I remember that if the actual return is less than the assumed rate, it can affect the cash value negatively, but I'm not sure how that impacts the death benefit.

Dahlia 1 year ago

This seems like a straightforward question, just need to make sure I hit all the key points - alignment with strategy, plan details, and addressing potential concerns.

Casie 1 year ago

Easy, the answer is definitely INTEGER. It's the most compact data type for storing whole numbers, which is exactly what we need for product quantities. I'm confident that's the right choice.

Finra Series-6 Exam - Topic 1 Question 12 Discussion