Question

Which of the following statements regarding equity index contract factors is most CORRECT?

A) Equity index contracts usually follow all stock market changes exactly.
B) Most equity index contracts are backed by separate accounts and are variable products.
C) All equity index contracts guarantee quarterly dividends.
D) Cash values of equity index contracts typically grow at a minimum interest rate.

Answer 1

The most correct statement about equity index contracts is that their cash values typically grow at a minimum interest rate. They are variable products connected to stock indices but don't always follow the market changes exactly and do not guarantee quarterly dividends.

Step-by-step explanation:

The most correct statement regarding equity index contract factors is that cash values of equity index contracts typically grow at a minimum interest rate. Equity index contracts are financial instruments tied to the performance of a stock index, like the S&P 500 or the Dow Jones Industrial Average. They do not always follow all stock market changes exactly because they can be designed with certain protections against market downturns, such as caps on maximum returns and floors on losses. Furthermore, most are variable products backed by separate accounts, and they do not guarantee quarterly dividends since dividends are not always paid by the companies in the index.