QUESTION 1

Using the "Human Life Value" method, how much life insurance should you purchase if you have 45 years until retirement, an annual income of $61,500 received at the start of each years, and a time value of money of 7%? (Assume 80% income replacement, ignore taxes and inflation.)

	a.	$669,392
	b.	$716,249
	c.	$895,311
	d.	$836,740

1 points

QUESTION 2

Using the "Desired Income" method, if you want to provide your survivors with a nominal annual income of $55,000 at the beginning of each year, how much life insurance is needed assuming your survivors can earn 7% interest annually? Assume a combined tax rate of 22%.

	a.	$268,817
	b.	$1,007,326
	c.	$250,000
	d.	$785,714

1 points

QUESTION 3

Using the "Desired Income" method, how much insurance would be needed if you want to provide your survisors with a real annual income of $55,000 at the beginning of each year? (Assume a before-tax rate of return of 7%, a marginal tax rate of 22%, and annual inflation rate of 3% per year.)

	a.	$2,535,620
	b.	$2,301,255
	c.	$1,833,333
	d.	$1,007326

1 points

QUESTION 4

Using the "Human Life Value" method, how much life insurance should you purchase if you take into account 3% annual inflation over the next 45 years until retirement, an annual income of $61,500 received at the start of each years, and a time value of money of 7%? (Assume 100% income replacement and a marginal tax rate of 15%)

	a.	$1,236,658
	b.	$1,272,027
	c.	$1,588,959.94
	d.	$1,545,823

1 points

QUESTION 5

You are 40 years old and earn $65,000 annually. Based on a multiple of income of 12, how much life insurance should you purchase?

	a.	$1,300,000
	b.	$780,000
	c.	$650,000
	d.	the answer is not given

QUESTION 6

Write down the formula for the methods: 1) Human Life Value 2) Desired Income