Mr. and Mrs. Grass are asking you to evaluate their life insurance needs. Mr. is 28...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
Mr. and Mrs. Grass are asking you to evaluate their life insurance needs. Mr. is 28 and Mrs. is 24. To date, they have not made any investments, preferring to give priority to paying their debts. They own a house with an uninsured mortgage of $85,000, which will be $35,000 in 5 years. They have a car, furniture and everything else they think they need. They give you the following information: - The Gazon couple has adopted a child who is now 1 year old. The couple's desire is to receive insurance income for 20 years if they die at age 28 or 15 years if they die at age 33. The couple's current cost of living is (16% * MAT) per year, which includes the annua mortgage cost of $11,600 and child-related expenses. If either spouse were to die, the annual provision for special projects is estimated at $2,000. The annual government benefit is $3,000 upon the death of either spouse. No special funds are provided for Mr. Smith's death, but Mrs. Smith suggests an education fund of $20,000 for the child at the two ages of analysis corresponding to her own death. Mrs. Smith's gross annual salary is $34,000 and Mr. Smith's is $14,000 per year. The disbursements attributable to the death of one of the spouses would be $6,000 after receipt of the death benefit from the government. No adjustment should be made for the cost of living at death. Mr. Smith's whole life insurance is $50,000 and Mrs. Smith has a 10-year term life insurance policy of $150,000. The future inflation rate is 6%. The return on future investments is estimated at 10%, before taxes. Tax rates of 30% are assumed for all calculations. Required a) Calculate the amount of capital required at death for Mr. and Mrs. Lawn for each of the two respective ages. b. Calculate the missing life insurance amounts for Mr. Groom and Mrs. Groom for each of the two respective ages. c) What insurance products would you recommend? Presumed date of death number of years of coverage Cost of living before death +annual project allowance -mortgage payment -deceased spouse's portion Net cost of living after death -non-taxable income child allowance income to be made up -surviving spouse's income Surviving spouse's pension net salary income shortfall to maintain cost of living capital required for income shortfall + release capital final disbursement Debts at death taxes payable at death + special funds Capital needed at death Mr. and Mrs. Grass are asking you to evaluate their life insurance needs. Mr. is 28 and Mrs. is 24. To date, they have not made any investments, preferring to give priority to paying their debts. They own a house with an uninsured mortgage of $85,000, which will be $35,000 in 5 years. They have a car, furniture and everything else they think they need. They give you the following information: - The Gazon couple has adopted a child who is now 1 year old. The couple's desire is to receive insurance income for 20 years if they die at age 28 or 15 years if they die at age 33. The couple's current cost of living is (16% * MAT) per year, which includes the annua mortgage cost of $11,600 and child-related expenses. If either spouse were to die, the annual provision for special projects is estimated at $2,000. The annual government benefit is $3,000 upon the death of either spouse. No special funds are provided for Mr. Smith's death, but Mrs. Smith suggests an education fund of $20,000 for the child at the two ages of analysis corresponding to her own death. Mrs. Smith's gross annual salary is $34,000 and Mr. Smith's is $14,000 per year. The disbursements attributable to the death of one of the spouses would be $6,000 after receipt of the death benefit from the government. No adjustment should be made for the cost of living at death. Mr. Smith's whole life insurance is $50,000 and Mrs. Smith has a 10-year term life insurance policy of $150,000. The future inflation rate is 6%. The return on future investments is estimated at 10%, before taxes. Tax rates of 30% are assumed for all calculations. Required a) Calculate the amount of capital required at death for Mr. and Mrs. Lawn for each of the two respective ages. b. Calculate the missing life insurance amounts for Mr. Groom and Mrs. Groom for each of the two respective ages. c) What insurance products would you recommend? Presumed date of death number of years of coverage Cost of living before death +annual project allowance -mortgage payment -deceased spouse's portion Net cost of living after death -non-taxable income child allowance income to be made up -surviving spouse's income Surviving spouse's pension net salary income shortfall to maintain cost of living capital required for income shortfall + release capital final disbursement Debts at death taxes payable at death + special funds Capital needed at death
Expert Answer:
Answer rating: 100% (QA)
a At age 60 Mr Smiths capital required at death 14000 6000 50000 x 106 50000 x 11... View the full answer
Related Book For
Posted Date:
Students also viewed these finance questions
-
In the winter, heat from a house with an inside temperature of 18 oC leaks out at a rate of 2.0 x 104 J. The out-side temperature is 0 oC. (a) What is the change in entropy per second of the house?...
-
A firm is insuring a house with an actual cash value of $200,000. They have insured this house for $185,000. How much would they receive from an insurer if a coinsurance clause is in place at the...
-
Jaylen and Avery have asked you to evaluate their current disability insurance coverage. What are the cash flow implications if Jaylen were to experience a serious disabling incident before...
-
Which of the following would be the most frequently occurring daily transaction in a retail shop? (a) Paying salary to the sales assistant (b) Sale of goods (c) Payment of rent for the shop premises...
-
The controller for Oneida Vineyards, Inc. has predicted the following costs at various levels of wine output. The companys marketing manager has predicted the following prices for the firms fine...
-
Is there a role for independent-thinking, decisive, and creative leaders in a team-based organization? Explain.
-
Four wires carry currents in the directions shown. A uniform magnetic field is directed into the paper as shown. Which wire experiences a force to the left? x X x x X roa X TRO x X X B. C. pyright A....
-
Give examples of needs, wants, and demands that JetBlue customers demonstrate, differentiating these three concepts. What are the implications of each for JetBlues practices? In 2007, JetBlue was a...
-
Parker, an active duty servicemember, receives student loan repayment benefits of $4,000 annually. In July 2023, Parker was deployed to Afghanistan. How much of Parker's student loan repayment...
-
Peter Piper has applied for a mortgage of $120,000. Interest is computed at 8.5 percent compounded semiannually. The mortgage will be paid off over 20 years. a. Calculate Peter's monthly payment. b....
-
Marie is saving to purchase a new house. You have $2500 in your account .Will add an additional $100 at the end of each month. How much will you have in 22 months if you earn J12=6%?
-
1 2. A ball of mass m is attached to a rope of length L. The ball is released from rest with the rope positioned horizontally, as shown. Express all answers in terms of m, L, and appropriate...
-
A 0.600 kg block rests on a frictionless horizontal surface, where it is attached to a massless spring whose k-value equals 18.0 N/m. Let x be the displacement, where x = 0 is the equilibrium...
-
Sound is produced by which of the following? Electrical currents moving through the air Vibrating objects pushing against air molecules Light bouncing off an object in the environment The emission of...
-
If the density of air is a constant 1.29 kg/m^3, how high does the Earth's atmosphere go if the pressure at sea level is 101,000 Pa? [Hint: The pressure in "space" is O Pa] 3,000 m 8,000 m 10,000 m...
-
Let f be a function given by =xx2x+2x+2. 3 f(x)=- What is the instantaneous rate of change of the derivative of fat x = -1? (10 points)
-
You have won a 1 million prize with the National Lottery ticket you bought last week and you want to invest the money. You are considering investment opportunities from a commercial bank. It offers...
-
1. What are some current issues facing Saudi Arabia? What is the climate for doing business in Saudi Arabia today? 2. Is it legal for Auger's firm to make a payment of $100,000 to help ensure this...
-
1. Describe the protections provided by long-term care insurance. 2. Distinguish between the benefit period and the waiting period for a long-term care policy. 3. List three aspects of long-term care...
-
(a) Make suggestions about how the $355 might be integrated into the Johnsons budget by making reductions in certain expense categories. (b) If they cannot make room in their budget for a $355...
-
Throughout this book, we will present a continuing case about Julia Price. Following is a brief description about her. Six years ago, Julia graduated with a degree in aeronautical engineering and...
-
A rejection network that can be utilised instead of the twin-T network is the bridged-T network shown below. The transfer function of this network is given by \[...
-
Draw Bode plots for a sixth-order Pade approximation to a pure delay of 1 second.
-
Sketch the polar plot of the frequency response for the following transfer functions: 1 (a) KG(s): = (1+0.5s) (1+2s) (1+0.5s) (b) KG(s) = $2 s+10 (c) KG(s) = s2+6s+10 30(s+8) (d) KG(s) = s(s+2)(s+4)
Study smarter with the SolutionInn App