Answer-first summary for fast verification
Answer: Characteristic II only
## Explanation **Characteristic II** would be more attractive to the hedge fund because: - **Low premiums relative to high terminal illness risk** means the hedge fund can acquire these policies at a lower cost while expecting higher payouts due to the elevated mortality risk. This creates a favorable risk-return profile for the hedge fund. - **Characteristic I** (high surrender value) is actually unattractive because it means policyholders have a strong incentive to surrender their policies, which would reduce the hedge fund's potential returns from death benefits. In life settlement investments, hedge funds want policies with: - Low premiums - High mortality risk (leading to earlier payouts) - Low surrender values (to discourage policyholders from cashing out)
Author: LeetQuiz Editorial Team
Ultimate access to all questions.
No comments yet.
59 A third-party broker has purchased life insurance contracts from the original policyholders. The broker now offers to sell these contracts to a hedge fund. An analyst notes the following characteristics of these contracts:
Which of these characteristics would most likely be attractive to the hedge fund?
A
Characteristic I only
B
Characteristic II only
C
Both Characteristic I and Characteristic II