Final answer:
The correct answer is option c) Remain the same.
Step-by-step explanation:
When Evan decides to surrender his whole life policy for a reduced paid-up policy, the cash value of his new policy will remain the same. This is because the reduced paid-up insurance option allows the policyholder to stop paying premiums and still maintain a policy with a reduced death benefit. The cash value already accumulated is used to buy the paid-up policy, which will have a lower death benefit but no future premiums will be required.
The reduced paid-up option takes the policy's existing cash value and purchases a fully paid-up policy that is in effect for the rest of the insured's life or until a certain age specified in the policy.
Therefore, neither the cash value nor the policy's new benefits will increase or decrease; instead, they will be adjusted to reflect the cash value at the time of conversation, essentially remaining the same but re-applied to a different death benefit amount.