Let's break down the scenario and requirements step by step: ### **Scenario Analysis** - **Harry's Age:** 62 - **Investment Amount:** $150,000 in segregated equity fund contracts - **Beneficiaries:** His children - **Investment Horizon:** Long-term (based on children's ages) - **Priority:** Minimize costs - **Health Concern:** Family history of heart disease, both uncle and father died before age 65 ### **Contract Guarantees** - **Maturity Guarantee:** Amount paid at contract maturity (if Harry is alive) - **Death Benefit Guarantee:** Amount paid to beneficiaries if Harry dies before maturity ### **Options Available** a. 10% (maturity) / 100% (death benefit) b. 75% / 75% c. 75% / 100% d. 100% / 75% ### **Step-by-Step Solution** #### **Step 1: Consider Death Benefit Guarantee** Harry has a **high risk of dying before age 65** due to family history. The death benefit guarantee should be **high** (preferably 100%) so his children are well protected if he passes away soon. #### **Step 2: Consider Maturity Guarantee** Harry's priority is to **minimize costs**. Higher maturity guarantees usually come with higher fees. Since the investment is for the long term (likely for his children), **the maturity guarantee is less important** than the death benefit. A lower maturity guarantee will reduce costs. #### **Step 3: Match with Options** - **a. 10%/100%:** Very low maturity guarantee (minimizes cost), full death benefit guarantee (maximizes protection for heirs) - **b. 75%/75%:** Balanced but not ideal since death benefit isn't maximized - **c. 75%/100%:** Higher cost due to higher maturity guarantee; death benefit is maximized, but Harry wants to minimize costs - **d. 100%/75%:** Highest cost due to highest maturity guarantee; death benefit not maximized **Option a (10%/100%)** is the best fit as it minimizes maturity guarantee (and thus costs), while providing maximum protection for his beneficiaries in case of early death. --- ### **Final Answer** **a. 10% / 100%** #### **Explanation:** This option best aligns with Harry’s desire to minimize costs and his need for a high death benefit guarantee due to his family health history.