(11-15.) Antonio and Trina are a young couple with two small children, Jason (age four) and Claudia (age two).

Trina is an account executive for a brokerage firm while Antonio has taken a couple years off from his profession

as a civil engineer to work on an MBA degree. Right now Antonio and Trina's budget is very tight, as they are

accustomed to living on two incomes, but Trina's employer has just circulated employer benefit information, so

Antonio and Trina believe this is a good time to evaluate their life insurance needs. They have listed the financial

information they believe is relevant.

Current life insurance (Antonio)

$ 75,000

Current life insurance (Trina)

$ 50,000

Assets available for living expenses

0

Present value of Social Security benefits if Antonio dies

$132,397

Present value of Social Security benefits if Trina dies

$151,905

Antonio's income before he went back for the MBA

$ 45,000

Trina's income

$ 50,000

Percent of income that needs to be replaced

75 percent

Projected final expenses

$7,000

Projected readjustment-period needs

$5,000

Projected debt-repayment needs

$ 15,000

Projected college-expenses

$ 80,000

Number of years income replacement is needed

20

Assumed rate of return on invested funds

5 percent

11. Using a 7-year multiple-of-earnings approach, how much additional life insurance is needed on Trina's life?

12. How much additional life insurance is needed on Antonio's life using his former income and the 7-year

multiple-of-earnings approach?

13. Using the needs-based approach, how much additional life insurance is needed on Trina's life?

a.

$373,845

b.

$468,750

c.

$525,750

d.

$575,750

14. Using the needs approach, how much additional life insurance is needed on Antonio's life using his former

income?

a.

$528,875

b.

$453,875

c.

$421,478

d.

$321,478