Mary and Steve are in their 40 s. Mary works part-time and earns $40,000 per year, while Steve is the primary breadwinner with an annual salary of $120,000. They have one child and have saved $20,000. Concerned about their financial well-being if Steve were to pass away prematurely, they are evaluating the trade-off between self-financing their risk by investing their savings and purchasing a term life insurance policy. Q1 Part (a) Using the multiple's approach, calculate the appropriate amount of life insurance coverage needed to provide Mary with a perpetual annual income of $80,000, should Steve pass away. Use a discount rate of 5%. Answer Here: Q1 Part (b) Mary and Steve are considering two investment options for their $20,000 savings as an alternative to insurance: a high-interest savings account with an annual yield of 5% p.a. compounded monthly, and a portfolio mix of $12,000 in equities (expected return of 7% ) and $8,000 in fixed-income securities (expected return of 4% ). You should assume the share portfolio compounds daily. Calculate the future value of their $20,000 under each investment option after 10 years. Answer Here: Q1 Part (c) Evaluate the advantages and disadvantages of using each investment option as a means of self-financing against the risk of Steve's premature death, as opposed to securing a term life insurance policy. Considering the necessary life insurance coverage determined in part (a) and the future savings projections from part (b), offer a recommendation on whether Mary and Steve should prioritize investing, buying insurance, or pursue a blended strategy of both. Type Answer Here