The capitalized income approach to calculating life insurance needs looks at how much life insurance is needed to be able to produce a perpetual income of $X/year. This calculation assumes that you would invest the life insurance settlement in order to provide this income.

• What impact would it have on your life needs calculation if you increase the expected return? In simple terms, explain why this is the case.
• What impact would it have on your life needs calculation if you increase the expected inflation rate? In simple terms, explain why this is the case.