John Wilson is a 40 year old computer programmer, husband and father of four. He wants to use the capital retention approach to determine how much life insurance he should purchase. Because of his $105,000 salary, and I need to care for the family support children, his wife does not work outside the home. The families current annual living expenses are approximately 75,000 per year including $8000 in annual IRA contributions. John prefers to use the capital retention approach so that he can be reasonably assured that his family will not exhaust the proceeds of a life insurance policy. However, he also wants to consider the possibility, the possible reduction and expenses and apply 70% replacement ratio to the calculation.

A. Calculate John's insurance need using the capital retention approach, and an after-tax discount rate of 5.5% assume end of period payment of benefits. 

B. Calculate John's insurance need using the human live value approach, and after tax discount rate of 5.5% in a remaining working life of 25 years zoom into. Payments of benefits. 

C. After your presentation, John was bewildered about why the human life value approach and the capital retention approach. 

Calculations resulted in significantly different insurance needs. Using the two formulas as a guide explain to John why this result occurred.