Your clients, Jamal and Chyna Gwynn, would like you to estimate their life insurance needs based on a comprehensive needs analysis. Their son, Jarius, is currently 13 years of age. Jamal and Chyna have high hopes for Jariuss future education. They would like to accumulate a $240,000 (in todays dollars) educational savings fund to pay for four years of college. In event of Jamals or Chynas passing, they will need $10,000 in transitional child care expenses. When making your estimate, the Gwynns would like to pay off all debt and liabilities at the death of the first spouse. Use the following information to determine the life insurance need for Jamal and Chyna separately:

Jamal: Age forty eight; Life Expectancy: Age ninety seven

Chyna: Age fifty; Life Expectancy: Age nine five

Desired Retirement Age: Age sixty two

Full Retirement Age: Age sixty seven

Earned Income: Jamal $145,000

Earned Income: Chyna $210,000

Bonus: Jamal $25,000

Investment Rate of Return: 7.90 Percent

Inflation Rate Assumption: 3.00 Percent

Marginal Federal and State Marginal Tax Rate Before Retirement: 29 Percent

Marginal Federal and State Marginal Tax Rate After Retirement: 29 Percent

Final Expenses: Jamal and Chyna $40,000 Each

Estate Administration: Jamal and Chyna $12,000 Each

Other Final Needs/Expenses: Jamal and Chyna $20,000 Each

Jointly Held Credit Card Debt: $45,000

Jointly Held Installment Debt: $82,000

Jointly Held Automobile Debt: $19,000

Jointly Held Mortgage Debt: $345,000

Jointly Held Other Debt: $190,000

Transitional Child Care Expenses: $10,000 Each

Household Expenses Needed in Event of Death: $296,000 Each

Capital Retention Replacement Ratio: 80 Percent

Expense Reduction Ratio While Jarius is at Home: 100 Percent

Social Security Benefits While Jarius is at Home: $0

Expense Reduction Ratio After Jarius Leaves Home but Survivor Turns Age sixty: 80 Percent

Social Security Benefits After Jarius Leaves Home but Survivor Turns Age sixty: 80 Percent

Income Needed from Age sixty to Full Retirement: $190,000 Each

Income Need While Retired: $190,000 Each

Social Security Benefit of Survivor: Jamal $42,000

Social Security Benefit of Survivor: Chyna $39,000

Other Income in Retirement: $80,000 Each

In-force Cash Value Life Insurance: Jamal $300,000

In-force Term and Cash Value Life Insurance: Chyna $500,000

Combined Retirement Assets: $1,500,000

Combined Other Savings: $200,000

Other Assets: $0

a.Approximately how much additional life insurance does Jamal need?

b.Approximately how much additional life insurance does Chyna need?

c.How do these estimates compare to the need from the human life value approach? What helps explain the difference?