Multiple Choice
The initial amount of money you deposit or invest is called the:
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7. Receivables and Investments
Introduction to Investments in Securities
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A level premium indicates:
A
The premium amount remains constant over the life of the investment.
B
The premium fluctuates based on market interest rates.
C
The premium is paid only at the end of the investment period.
D
The premium increases each year as the investment matures.
Verified step by step guidance1
Understand the term 'level premium': A level premium refers to a fixed premium amount that does not change over the life of the investment or insurance policy.
Analyze the options provided: The correct answer should align with the definition of a level premium, which is constant and does not fluctuate.
Eliminate incorrect options: For example, options suggesting fluctuation based on market interest rates, payment only at the end of the investment period, or annual increases are inconsistent with the concept of a level premium.
Select the correct option: The correct answer is the one that states the premium amount remains constant over the life of the investment.
Review the concept: Ensure you understand why the other options are incorrect and how the definition of a level premium supports the correct choice.
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