Assignment 1 Directions: Use the Needs Approach mentioned in chapter 4 to determine the life insurance need for the fictional client mentioned below. Tip: Use the example for needs analysis in Chapter 4, the recorded lectures, and the video tutorial in week 3 for help with the calculations. Also take notice of the note included below the present value calculations in the book example. Round all numbers to the nearest whole dollar. Show all time value of money entries and all supporting work for calculations to allow me to award partial credit. There is no rubric for this assignment. A total of 80 points is available. Point totals are provided below for each question. **There is an error in the calculations in the box on page 101. If you are trying to duplicate the answers there for purposes of applying the same technique to this assignment you will not get the same answers as the book unless you correctly adjust the value for "I/YR" to the following: [(((1.05/1.03) 1) * 100) / 12] Client Scenario: Chris and Jennifer Wilson are both 31 years old. They have two kids Emily, age 6 and Conner, age 4. Using the Needs Approach, help the Wilson family determine how much insurance is needed on Chris's life to provide adequate protection for the family should he die. Assume the following additional points: Social Security for $2,800 per month until Emily turns age 18 and Conner is 16. Then Social Security for $1,400 per month from Conner's age of 16 to 18. The children stop receiving benefits upon turning age 18. Social Security widow's benefit from age 60 to life expectancy age 99 for $2,800 per month. College education costs of $28,000 per year per child in today's dollars, at age 18 for four years. The education inflation rate is 5.00%. Total income needs of Jennifer during the dependency period until Conner is age 22 is $7,500 per month in today's dollars. The same monthly income need continues through her remaining life expectancy. Inflation is expected to be 2.5% The investment rate of return is expected to be 6.5%. Final expenses are anticipated to be $65,000. Mortgage and debt repayment total $180,000. Calculations: There are four time bands or age bands during Jennifer's life where spending needs may not be fully met with Social Security income. Pattern your answer after the example on page 101-102. 1. (15 points) Time value of money calculation: Determine the net spending deficit (if any) for time band one by taking the monthly income need and subtracting the Social Security benefit Jennifer and the children will be entitled to during period one. I am looking for the net income need and the ages for Jennifer, Emily, and Conner during each period. Show your work and the time value of money keystrokes required to calculate the lump sum spending need for each time period. Assignment 1 2. (15 points) Time value of money calculation: Determine the net spending deficit (if any) for time band two by taking the monthly income need and subtracting the Social Security benefit Jennifer and the children will be entitled to during period two. I am looking for the net income need and the ages for Jennifer, Emily, and Conner during each period. Show your work and the time value of money keystrokes required to calculate the lump sum spending need for each time period. 3. (15 points) Time value of money calculation: Determine the net spending deficit (if any) for time band three by taking the monthly income need and subtracting the Social Security benefit Jennifer and the children will be entitled to during period three. I am looking for the net income need and the ages for Jennifer, Emily, and Conner during each period. Show your work and the time value of money keystrokes required to calculate the lump sum spending need for each time period. 4. (15 points) Time value of money calculation: Determine the net spending deficit (if any) for time band four by taking the monthly income need and subtracting the Social Security benefit Jennifer and the children will be entitled to during period four. I am looking for the net income need and the ages for Jennifer, Emily, and Conner during each period. Show your work and the time value of money keystrokes required to calculate the lump sum spending need for each time period. 5. (12 points) The lump sum values calculated in numbers 2, 3, and 4 are in future dollars. Now we need to know how much those lump sum values equate to in today's dollars. Show your work and time value of money keystrokes to bring the (future) lump sum values back to the present value at Jennifer's current age of 31. There should be 3 different calculations here. Use the note under the graphic on page 101 for hints about how to proceed. 6. (8 points) Now that the family spending need is clear, factor in any other needs that should be met with life insurance as mentioned in the fact set above for the Wilson family. Use their end of life needs from the fact set and information from numbers 1 through 5 to determine the final insurance need to adequately insure Chris's life. Assignment 1 Directions: Use the Needs Approach mentioned in chapter 4 to determine the life insurance need for the fictional client mentioned below. Tip: Use the example for needs analysis in Chapter 4, the recorded lectures, and the video tutorial in week 3 for help with the calculations. Also take notice of the note included below the present value calculations in the book example. Round all numbers to the nearest whole dollar. Show all time value of money entries and all supporting work for calculations to allow me to award partial credit. There is no rubric for this assignment. A total of 80 points is available. Point totals are provided below for each question. **There is an error in the calculations in the box on page 101. If you are trying to duplicate the answers there for purposes of applying the same technique to this assignment you will not get the same answers as the book unless you correctly adjust the value for "I/YR" to the following: [(((1.05/1.03) 1) * 100) / 12] Client Scenario: Chris and Jennifer Wilson are both 31 years old. They have two kids Emily, age 6 and Conner, age 4. Using the Needs Approach, help the Wilson family determine how much insurance is needed on Chris's life to provide adequate protection for the family should he die. Assume the following additional points: Social Security for $2,800 per month until Emily turns age 18 and Conner is 16. Then Social Security for $1,400 per month from Conner's age of 16 to 18. The children stop receiving benefits upon turning age 18. Social Security widow's benefit from age 60 to life expectancy age 99 for $2,800 per month. College education costs of $28,000 per year per child in today's dollars, at age 18 for four years. The education inflation rate is 5.00%. Total income needs of Jennifer during the dependency period until Conner is age 22 is $7,500 per month in today's dollars. The same monthly income need continues through her remaining life expectancy. Inflation is expected to be 2.5% The investment rate of return is expected to be 6.5%. Final expenses are anticipated to be $65,000. Mortgage and debt repayment total $180,000. Calculations: There are four time bands or age bands during Jennifer's life where spending needs may not be fully met with Social Security income. Pattern your answer after the example on page 101-102. 1. (15 points) Time value of money calculation: Determine the net spending deficit (if any) for time band one by taking the monthly income need and subtracting the Social Security benefit Jennifer and the children will be entitled to during period one. I am looking for the net income need and the ages for Jennifer, Emily, and Conner during each period. Show your work and the time value of money keystrokes required to calculate the lump sum spending need for each time period. Assignment 1 2. (15 points) Time value of money calculation: Determine the net spending deficit (if any) for time band two by taking the monthly income need and subtracting the Social Security benefit Jennifer and the children will be entitled to during period two. I am looking for the net income need and the ages for Jennifer, Emily, and Conner during each period. Show your work and the time value of money keystrokes required to calculate the lump sum spending need for each time period. 3. (15 points) Time value of money calculation: Determine the net spending deficit (if any) for time band three by taking the monthly income need and subtracting the Social Security benefit Jennifer and the children will be entitled to during period three. I am looking for the net income need and the ages for Jennifer, Emily, and Conner during each period. Show your work and the time value of money keystrokes required to calculate the lump sum spending need for each time period. 4. (15 points) Time value of money calculation: Determine the net spending deficit (if any) for time band four by taking the monthly income need and subtracting the Social Security benefit Jennifer and the children will be entitled to during period four. I am looking for the net income need and the ages for Jennifer, Emily, and Conner during each period. Show your work and the time value of money keystrokes required to calculate the lump sum spending need for each time period. 5. (12 points) The lump sum values calculated in numbers 2, 3, and 4 are in future dollars. Now we need to know how much those lump sum values equate to in today's dollars. Show your work and time value of money keystrokes to bring the (future) lump sum values back to the present value at Jennifer's current age of 31. There should be 3 different calculations here. Use the note under the graphic on page 101 for hints about how to proceed. 6. (8 points) Now that the family spending need is clear, factor in any other needs that should be met with life insurance as mentioned in the fact set above for the Wilson family. Use their end of life needs from the fact set and information from numbers 1 through 5 to determine the final insurance need to adequately insure Chris's life