The Lopez family has come to you for advice on life insurance cover to protect their family. Sanjay Lopez, aged 40, is a plumber and his wife, Sarah, aged 35, is a hairdresser. Both work full-time. They have two children: Linda, aged two (2), and Jasper, aged four (4).

Sanjay earns $45,000 and Sarah earn $20,000 and they currently only save $100 per month.

1. If Sanjay was to die, Sarah wants to provide monthly income of $4,500 to their family during the dependency period of their children until the youngest reaches age 18. However, when the youngest child has reached age 18, Sarah would then like to cover $3,250 per month for her life expectancy (age 85) to supplement her income.

Assuming an interest rate of 7% (compounded monthly), inflation at 1.5% (adjusted monthly), what is the total capital requirement needed for income for Sarah in the event of Sanjays death?

ALSO, assume Sarah would like this payment to begin at the start of each month from month 1.