Question 3 a & b
sold The pe efit or e of of each of the followin 1. The discount rate used to calculate the human life value is increased. 2. The amount of average annual income going to the family is increased. 3. The period over which income is paid to the family is reduced. b. Explain the limitations of the human life value approach as a method for determining the amount of life insurance to own. ce? mary Based insuranc 5. Todd, ag able reti value li elop e of characte The life 3. Kelly, age 35, is a single parent and has a 1-year-old son. She earns $45,000 annually as a marketing ana- lyst. Her employer provides group life insurance in the amount of twice the employee's salary. Kelly also YO participates in her employer's 401(k) plan. She has the following financial needs and objectives: Funeral costs and uninsured medical bills $ 10,000 Income support for her son $2,000 monthly for 17 years Pay off mortgage on home sper 150,000 Pay off car loan and credit card debts 15,000 College education fund for sonspec 150,000 bin Kelly has the following financial assets: Checking account $ 2,000 - IRA account 8,000 401(k) plan 25,000 - Individual life insurance 25,000 Group life insurance 90,000 a. Ignoring the availability of Social Security survivor ben- efits, how much additional life insurance, if any, should Kelly purchase to meet her financial goals based on the needs approach? (Assume that the rate of return earned on the policy proceeds is equal to the rate of inflation.) b. How much additional life insurance, if any, is needed if estimated Social Security survivor benefits in the amount of $800 monthly are payable until her son attains age 18? 4. Megan age 32. is married and has a con 1 sold The pe efit or e of of each of the followin 1. The discount rate used to calculate the human life value is increased. 2. The amount of average annual income going to the family is increased. 3. The period over which income is paid to the family is reduced. b. Explain the limitations of the human life value approach as a method for determining the amount of life insurance to own. ce? mary Based insuranc 5. Todd, ag able reti value li elop e of characte The life 3. Kelly, age 35, is a single parent and has a 1-year-old son. She earns $45,000 annually as a marketing ana- lyst. Her employer provides group life insurance in the amount of twice the employee's salary. Kelly also YO participates in her employer's 401(k) plan. She has the following financial needs and objectives: Funeral costs and uninsured medical bills $ 10,000 Income support for her son $2,000 monthly for 17 years Pay off mortgage on home sper 150,000 Pay off car loan and credit card debts 15,000 College education fund for sonspec 150,000 bin Kelly has the following financial assets: Checking account $ 2,000 - IRA account 8,000 401(k) plan 25,000 - Individual life insurance 25,000 Group life insurance 90,000 a. Ignoring the availability of Social Security survivor ben- efits, how much additional life insurance, if any, should Kelly purchase to meet her financial goals based on the needs approach? (Assume that the rate of return earned on the policy proceeds is equal to the rate of inflation.) b. How much additional life insurance, if any, is needed if estimated Social Security survivor benefits in the amount of $800 monthly are payable until her son attains age 18? 4. Megan age 32. is married and has a con 1
