Chong is starting a winery business in his home town of Kelowna, British Columbia. Chong needs money
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Chong is starting a winery business in his home town of Kelowna, British Columbia. Chong needs money to get started. He has a permanent policy on his own life with a cash surrender value (CSV) of $1 million and is considering using the CSV to secure a loan, as requested by his lender. Chong only needs to assign a portion of the policy and he is considering a partial collateral assignment of $500,000. Which of the statements below about Chong\'s partial collateral assignment is correct? | ||
To secure their interest during the term of the loan, the lender becomes owner of the policy. | ||
Chong retains ownership of the policy and can make policy withdrawals as desired. | ||
If the loan is still outstanding when Chong dies, the lender has first rights on the full death benefit. | ||
If Chong defaults on the loan while he is alive, the lender can force a surrender of the policy to recover the unpaid loan balance. |
Related Book For
Fundamentals of Corporate Finance
ISBN: 978-1118845899
3rd edition
Authors: Robert Parrino, David S. Kidwell, Thomas W. Bates
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