A person JS is the CEO of a company RL. The company RL deals in buying life insurance policies at a discount from patients who are on their death bed and sells the same to investors. The terminally ill patients receive payments as a percentage of future death benefits. The investors buy the insurance policies at 85 percentage of the value of future benefits. The patients utilize this money for their treatment, and the investors are entitled to a guaranteed return on their investment. The company RL draws a profit from the difference between the sale and the purchase price. According to JS, most of the policies are genuine, barring a few. Insurance companies, on discovering the fake policies, might cancel them and refuse to pay. To explain : The decision-making process of the person JS in deciding whether to divulge the risk of fake policies to investors.

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Jeremy is considering a corporate recapitalization as a gifting technique and has come to his financial planner for more information. Which of the following statements regarding corporate recapitalization are CORRECT? The stock is recapitalized and divided into nonvoting preferred stock and voting common stock. Jeremy retains control of the corporation through the voting rights associated with his preferred stock. Recapitalization can be used in any corporation. The gift of stock given to the junior family members may qualify for valuation discounts. A) II, III, and IV B) I and III C) II and IV D) I and II

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Chapter 5, Problem 4RE

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Case summary:A person JS is the CEO of a company RL. The company RL deals in buying life insurance policies at a discount from patients who are on their death bed and sells the same to investors. The terminally ill patients receive payments as a percentage of future death benefits. The investors buy the insurance policies at 85 percentage of the value of future benefits. The patients utilize this money for their treatment, and the investors are entitled to a guaranteed return on their investment. The company RL draws a profit from the difference between the sale and the purchase price. According to JS, most of the policies are genuine, barring a few. Insurance companies, on discovering the fake policies, might cancel them and refuse to pay.

To explain :The decision-making process of the person JS in deciding whether to divulge the risk of fake policies to investors.

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