Mr. Smith, age 35, is currently earning $40,000 per year.He expects his income will increase by the rate of inflation each year, which is expected to be 5% per year. He intends to retire at age 65, 30 years from now.

1) Use the income approach to determine the face amount of the life insurance policy that Mr. Smith should buy.

2) Mr. Smith is trying to determine if he should buy whole life insurance or term life Insurance. You are in favour of whole life insurance. Provide two advantages of purchasing whole life insurance over term life.