Stuart is looking to take out life insurance on himself naming his wife as a beneficiary. Stuart earns a good living of $15,000/mth with a MTR with deductions of 40%. When you met with Stuart he provided you the following information: (Everyone)

• His wife stays at home to raise their infant child and will not be returning back to work as they have decided to home school

• Primary residence $550,000 with mortgage of $330,000

• Outstanding car loan of $40,000

• Monthly expenses are currently $9000 but expected to be $5000 without Stuart

• Final expenses $20,000

• Emergency fund is short $25,000

• Education fund for post-secondary $60,000

• Donation to the hospice that helped his sister after her accident $100,000

• Inflation rate of 2% per year

• Current investment returns at 5% (after-tax)

1. What should the face amount of his insurance policy be using the replacement of income approach?

2. What should it be using the capital needs approach?