Question: Joetta Hernandez is a single parent with two children and earns $43,500 a year. Her employer's group life insurance policy would pay 2.5 times her

Joetta Hernandez is a single parent with two children and earns

$43,500

a year. Her employer's group life insurance policy would pay 2.5 times her salary. She also has

$58,000

saved in a 401(k) plan,

$4,833

in mutual funds, and a

$2,900

CD. She wants to purchase term life insurance for 15 years until her youngest child is self-supporting. She is not concerned about her outstanding mortgage, as the children would live with her sister in the event of Joetta's death. Assuming she can receive a

5

percent after-tax, after-inflation return on insurance proceeds, use the earnings multiple method to calculate her insurance need. How much more insurance does Joetta need to buy? What other information would you need to know to use the needs approach to calculate Joetta's insurance coverage?Click on the table icon to view the PVIFA table

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.

Assuming she can receive a

5

percent after-tax, after-inflation return on insurance proceeds and using the earnings multiple method, Joetta's insurance need is

$nothing.

(Round to the nearest dollar.)

Present Value of an Annuity of $1 (PVIFA)

n

1%

2%

3%

4%

5%

6%

7%

8%

9%

10%

1

0.990

0.980

0.971

0.962

0.952

0.943

0.935

0.926

0.917

0.909

2

1.970

1.942

1.913

1.886

1.859

1.833

1.808

1.783

1.759

1.736

3

2.941

2.884

2.829

2.775

2.723

2.673

2.624

2.577

2.531

2.487

4

3.902

3.808

3.717

3.630

3.546

3.465

3.387

3.312

3.240

3.170

5

4.853

4.713

4.580

4.452

4.329

4.212

4.100

3.993

3.890

3.791

6

5.795

5.601

5.417

5.242

5.076

4.917

4.767

4.623

4.486

4.355

7

6.728

6.472

6.230

6.002

5.786

5.582

5.389

5.206

5.033

4.868

8

7.652

7.325

7.020

6.733

6.463

6.210

5.971

5.747

5.535

5.335

9

8.566

8.162

7.786

7.435

7.108

6.802

6.515

6.247

5.995

5.759

10

9.471

8.983

8.530

8.111

7.722

7.360

7.024

6.710

6.418

6.145

11

10.368

9.787

9.253

8.760

8.306

7.887

7.499

7.139

6.805

6.495

12

11.255

10.575

9.954

9.385

8.863

8.384

7.943

7.536

7.161

6.814

13

12.134

11.348

10.635

9.986

9.394

8.853

8.358

7.904

7.487

7.103

14

13.004

12.106

11.296

10.563

9.899

9.295

8.745

8.244

7.786

7.367

15

13.865

12.849

11.938

11.118

10.380

9.712

9.108

8.559

8.061

7.606

16

14.718

13.578

12.561

11.652

10.838

10.106

9.447

8.851

8.313

7.824

17

15.562

14.292

13.166

12.166

11.274

10.477

9.763

9.122

8.544

8.022

18

16.398

14.992

13.754

12.659

11.690

10.828

10.059

9.372

8.756

8.201

19

17.226

15.678

14.324

13.134

12.085

11.158

10.336

9.604

8.950

8.365

20

18.046

16.351

14.877

13.590

12.462

11.470

10.594

9.818

9.129

8.514

21

18.857

17.011

15.415

14.029

12.821

11.764

10.836

10.017

9.292

8.649

22

19.660

17.658

15.937

14.451

13.163

12.042

11.061

10.201

9.442

8.772

23

20.456

18.292

16.444

14.857

13.489

12.303

11.272

10.371

9.580

8.883

24

21.243

18.914

16.936

15.247

13.799

12.550

11.469

10.529

9.707

8.985

25

22.023

19.523

17.413

15.622

14.094

12.783

11.654

10.675

9.823

9.077

30

25.808

22.396

19.600

17.292

15.372

13.765

12.409

11.258

10.274

9.427

40

32.835

27.355

23.115

19.793

17.159

15.046

13.332

11.925

10.757

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