A client invested $100,000 into a segregated fund contract with a 75% maturity guarantee and a 75% death benefit guarantee, resetting both guarantees annually on the contract anniversary. After two years, the fund value reached $120,000, and the client chose to reset the guarantees. Two years later, the fund value had dropped to $80,000. If the client were to surrender the contract at this point, what would be the minimum guarantee payout, assuming no further guarantee resets?

Question: A client invested $100,000 into a segregated fund contract with a 75% maturity guarantee and a 75% death benefit guarantee, resetting both guarantees annually on the contract anniversary. After two years, the fund value reached $120,000, and the client chose to reset the guarantees. Two years later, the fund value had dropped to $80,000. If the client were to surrender the contract at this point, what would be the minimum guarantee payout, assuming no further guarantee resets?

Answer options: ✅ $90,000

• $75,000
• $80,000
• $120,000

Correct answer: $90,000

Explanation: The original investment was $100,000. After two years, the fund value was $120,000, and the client reset the guarantees. This action established the new guaranteed amount as 75% of the new fund value of $120,000, which is $90,000. Guarantees are typically based on the highest reset value or initial deposit, whichever is greater, multiplied by the guarantee percentage.