Brenda, age 33, is a single parent with a 2-year-old daughter. She earns $49,500 a year as a credit analyst for a commercial mortgage lender. Her employer provides group life insurance equal to twice an employees annual salary. Brenda also signed a salary reduction agreement which enables her to contribute to the firms 401K plan.

Brenda has the following financial needs and objectives:

Funeral costs and uninsured medical bills. $13,000

Income support for her daughter for 16 years $2,000 a month

Pay off mortgage on house. $168,000 Pay off car loan and credit card debt $19,500

Build college fund for her daughter $210,000

Brenda has the following financial assets:

Checking account $3,450

Traditional IRA account $10,000

401K plan $32,600

Individual life insurance $50,000

Group life insurance $99,000

Social Security Survivor Benefits in the amount of $965 are payable to Brenda each month until her daughter turns 18.

(a) On the basis of the needs approach, how much additional life insurance (if any) should Brenda purchase to meet her financial goals. Show your calculations.

(b) How would your answer change to (a) if Brenda did not receive a social security payment each month? Show your calculations

(c) How could the needs approach be modified to provide Brenda with more precise information on the adequacy of her life insurance coverage? What improvements/enhancements to the methodolgy would you recommend?