Question: Allison (30) is married to Jay (37). They both plan to work until age 66. Allison earns $42,000 annually and Jay earns $104,000 annually. In
Allison (30) is married to Jay (37). They both plan to work until age 66. Allison earns $42,000 annually and Jay earns $104,000 annually. In case one were to die, the survivor will need $116,000 in household income. They expect inflation to be 3.2%. Given their risk tolerance, the appropriate after-tax rate of return from their investments is 9.8%.
Which of the following is the interest rate to calculate Allisons life insurance need using the human life value approach?
6.4%
6.6%
3.2%
9.8%
Which of the following is the number of periods to calculate Allisons life insurance need using the human life value approach?
30
36
66
29
Which of the following is the payment to calculate Allisons life insurance need using the human life value approach?
12,000
42,000
104,000
74,000
How much life insurance Allison must purchase for their family using the human life value approach?
178,206
586,230
623,721
167,494
How much life insurance Allison must purchase for their family using the capital retention approach?
656,727
187,636
1,626,181
1,157,090
Which of the following is the survivors income need in case Allison were to die?
146,000
116,000
42,000
12,000
Which of the following is the number of periods to calculate Allisons life insurance need using the income retention approach?
36
30
29
66
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