Final answer:
Under a traditional cross purchase buy-sell agreement for 3 partners, each partner needs to purchase 2 policies on the other partners, resulting in a total of 6 policies.
Step-by-step explanation:
The student asked how many policies would have to be purchased under a traditional cross purchase buy-sell agreement plan for a partnership with 3 partners who each have an equal ownership interest in their $3,000,000 business. In a cross purchase buy-sell agreement, each partner buys a policy on each of the other partners. With 3 partners, this means that each partner needs to purchase a life insurance policy on each of the other 2 partners. Therefore, Partner A buys a policy on Partner B and Partner C, Partner B buys a policy on Partner A and Partner C, and Partner C buys a policy on Partner A and Partner B. This results in a total of 3 x 2 = 6 policies. Answer C is correct.