b. What is the value at retirement of her income needs in retirement? 4.) Marcia has a 7% rate of return before retirement and 5.5% in retirement when inflation is 2.5%. She expects to live 25 years in retirement. She will receive a non-indexed pension of $22,000 before tax a year and $16,000 before tax in CPP and OAS retirement income. She estimates she will need $55,000 a year before-tax in retirement. a. What is the real interest rate before and after retirement? 1.) Chris and Christina have two children: Steven, 4, and Stephanie, 5. Both Chris and Christina work in construction, an occupational field which is considered quite dangerous. They wish to purchase life insurance but they don't know how much they need. Using the following information, calculate their required amount of life insurance using the income approach. a.) They want to have at least enough money, in case of one of their deaths, to have their children attend university debt free. b.) The kids will finish university in about 20 years. c.) The real rate of interest in Canada is about 3%. d.) Chris makes $105,000 gross per year. e.) Christina makes $90000 gross per year. f.) Assume an average tax rate of 32%. g.) They have insurance coverage at work that will pay them one times their gross annual salary if they die. h.) They also have mortgage insurance through their bank that will pay off the remainder of their mortgage if one of them were to die. 2.) Chris and Christina from the previous question have the following assets and liabilities: a.) Their present total annual expenses are $110,000. b.) There are cost savings if one dies because the deceased no longer needs clothes, food, a car, etc. However, there will also be higher expenses because the deceased filled a role in the family and the household duties of the deceased will have to be provided by the surviving spouse and also by paying for them - child care costs, buying groceries, dropping off dry cleaning, housework and yard work, etc. Let's add \$5,000 a year to their expenses for added costs over and above the cost savings. c.) They have mortgage insurance so the mortgage is paid off, meaning the remaining spouse will have lower expenses by about $20,000 a year. d.) Both spouses contribute to their RRSPs for retirement savings. The death of one spouse would decrease the amount of savings that would build until retirement. Add an additional $12,000 to savings in order to make up the difference. e.) Calculate the amount of insurance that each of them require using the expense approach. 3.) Chris and Christina believe they can earn a 3% real rate of return on their capital. How much insurance would they need to have to cover their annual shortfall without using up their capital? c. What is the present value at retirement of her non-indexed pension? d. What is the present value at retirement of her CPP and OAS retirement income? What is Marcia's shortfall/surplus before tax at retirement