Tarek Framborgia is considering the purchase of a disability policy He is currently thirty five years old and earns $50,000 per year as a quality control engineer for a major industrial company He worries that with his moderately strenuous job responsibilities, and his potential for increasing earnings, he may not be adequately covered should an offthejob accident keep him from continuing his career He has come to you with the following list of problems and questions aIf I purchase a policy that pays a fixed benefit of 90 percent of my current salary, how long will it be before this amount covers only 70 percent of my future salary if I assume salary increases of 4 percent per year bAssuming the same policy as above, if I purchase a policy with a provision for future increases of $1,000 per year, how long will this new policy cover at least 70 percent of my income cIf I assume that both my salary and the inflation rate increase at 4 percent per year, and that there is no floor or ceiling to my potential benefit increases because I purchase both a COLA and future increase option provisions on the above policy, how much should my annual benefit be in twenty five years

Answer rating: 100% (QA)

Facts 1 Tarek Framborgia 35 year old 2 Earns 50000 per year a Policy ... View the full answer