Teresa is a single parent that earns $45,000 per year. She estimates that her funeral costs would be $15,000 and would like to set up a college fund for her daughter at $60,000. Teresa would also like her daughter to receive a lump sum upon her death to cover her care for the next 10 years which is estimated at $20,000 a year.

1. Use the budget approach to recommend the level of life insurance that Teresa needs to purchase? (Show calculation)
2. Use the income method to calculate Teresa's life insurance needs (Show calculation)
3. Which method would you recommend using in this situation? Explain your choice and why it would be the best option.

(Note everything is based on 10 years of expenses, only use the figures above and refer to explanation on pgs. 353-354, not the examples as this is not an annuity so no PV factors will be used in these problems.)