Directions:Use the Needs Approach mentioned in chapter 4 to determine the life insurance need for the fictional client mentioned below.Tip:Use the example for needs analysis in Chapter 4, the recorded lectures, and the video tutorial in week 3 for help with the calculations.Show all time value of money entries and all supporting work for calculations to allow me to award partial credit.There is no rubric for this assignment.A total of 80 points is available.Point totals are provided below for each question.

Client Scenario:Matthew and Madison Abbott are both 32 years old.They have two kids Tori, age 6 and Trace, age 3.Using the Needs Approach, help the Abbott family determine how much insurance is needed on Matthew's life to provide adequate protection for the family should he die.Assume the following additional points:

Social Security for $2,400 per month until Trace turns age 16.Madison is no longer entitled to benefits after Trace turns 16.

Social Security for $1,200 per month until Trace is 18.The children stop receiving benefits upon turning age 18.

Social Security widow's benefit from age 60 to life expectancy age 93 for $3,000 per month.

College education costs of $24,000 per year per child in today's dollars, at age 18 for four years.

The education inflation rate is 4.00%.

Total income needs of Madison during the dependency period until Trace is age 22 is $6,500 per month in today's dollars.The same monthly income need continues through her remaining life expectancy.

Inflation is expected to be 2.25%

The investment rate of return is expected to be 7.25%.

Final expenses are anticipated to be $52,000.

Mortgage and debt repayment total $298,000.

Calculations:

There are four time bands or age bands during Madison's life where spending needs may not be fully met with Social Security income.For each age band, use time value of money calculations to show how much of her income stream is missing (if any) and therefore needs to be made up with life insurance on Matthew's life.Pattern your answer after the example on page 150-151.

1.(15 points)Time value of money calculation:Determine the net spending deficit (if any) for time band one by taking the monthly income need and subtracting the Social Security benefit Madison and the children will be entitled to during period one.I am looking for the net income need and the ages for Madison, Tori, and Trace during each period.Show your work and the time value of money keystrokes required to calculate the lump sum spending need for each time period.

2.(15 points)Time value of money calculation:Determine the net spending deficit (if any) for time band two by taking the monthly income need and subtracting the Social Security benefit Madison and the children will be entitled to during period two.I am looking for the net income need and the ages for Madison, Tori, and Trace during each period.Show your work and the time value of money keystrokes required to calculate the lump sum spending need for each time period.

3.(15 points)Time value of money calculation:Determine the net spending deficit (if any) for time band three by taking the monthly income need and subtracting the Social Security benefit Madison and the children will be entitled to during period three.I am looking for the net income need and the ages for Madison, Tori, and Trace during each period.Show your work and the time value of money keystrokes required to calculate the lump sum spending need for each time period.

4.(15 points)Time value of money calculation:Determine the net spending deficit (if any) for time band four by taking the monthly income need and subtracting the Social Security benefit Madison and the children will be entitled to during period four.I am looking for the net income need and the ages for Madison, Tori, and Trace during each period.Show your work and the time value of money keystrokes required to calculate the lump sum spending need for each time period.

5.(12 points)The lump sum values calculated in numbers 2, 3, and 4 are in future dollars.Now we need to know how much those lump sum values equate to in today's dollars.Show your work and time value of money keystrokes to bring the (future) lump sum values back to the present value at Madison's current age of 32.There should be 3 different calculations here.Use the note under the graphic on page 150 for hints about how to proceed.

6.(8 points)Now that the family spending need is clear, factor in any other needs that should be met with life insurance as mentioned in the fact set above for the Abbott family.Use their end of life needs from the fact set and information from numbers 1 through 5 to determine the final insurance need to adequately insure Matthew's life.