Joetta Hernandez is a single parent with two children and earns $55,600 a year. Her employer's group life insurance policy would pay 2.5 times her salary. She also has $74,133 saved in a 401(k) plan, $6,178 in mutual funds, and a $3,707 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 2% 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?
Joetta Hernandez is a single parent with two children and earns $55,600 a year. Her employer's...
Joetta Hernandez is a single parent with two children and earns $58400 a year. Her employer's group life insurance policy would pay 2.5 times her salary. She also has $77867 saved in a 401(k) plan, $6489 in mutual funds, and a $3893 certificate of deposit. 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...
Natasha is 38 years old and married with two children. She earns $60,000 a year gross, and nets $46,000 after taxes. She anticipates working for 25 more years, and wants to assume a 5% rate of return. What is her life insurance need if she wants to use the income multiplier approach, and as her financial planner you use a multiplier of 15?
Natasha is 38 years old and married with two children. She earns $60,000 a year gross, and nets $46,000 after taxes. She anticipates working for 25 more years, and wants to assume a 5% rate of return. What is her life insurance need if she wants to use the income multiplier approach, and as her financial planner you use a multiplier of 15? A: $690,000 B: $1,200,000 C: $900,000 D: $720,000
Susan is a 42-year-old lawyer who has taken out a universal life insurance policy to protect her two children (ages 13 and 10) in the event of her death. Each year, Susan chooses how much she would like to contribute to the policy, as shown by the first row of the table below. The insurance company subtracts from this an administrative fee along with the cost of the death benefit (the into the cash value (or pure insurance portion of...
Scenario Carmen is a 40-year-old housewife. She has been living with her husband and two children in Hong Kong for 1 year. The children are studying in kindergarten and primary school. She worked as a manager in her homeland but she could not find a job after migration. She looks after the family and does all the chores at home. She does not have many friends nor relatives. She has been frustrated and upset as she finds that she cannot...
Marge is a single parent who dropped out of high school to marry Andrew when she was 17 years old and pregnant. After 6 years of marriage and two children (Stacy, age 5 years, and Monica, age 2 years), Marge divorced Andrew because of his drinking, affairs, and lack of support of her and the children. Andrew has a job delivering newspapers and spends free time drinking beer with friends. He only sporadically provides monetary support. Marge and the girls...
Case Study Marge is a single parent who dropped out of high school to marry Andrew when she was 17 years old and pregnant. After 6 years of marriage and two children (Stacy, age 5 years, and Monica, age 2 years), Marge divorced Andrew because of his drinking, affairs, and lack of support of her and the children. Andrew has a job delivering newspapers and spends free time drinking beer with friends. He only sporadically provides monetary support. Marge and...
In 1976, 14-year-old Trina Garnett was living on the streets of Chester, Pennsylvania. She was the youngest of 12 children. Her father (Walter Garnett) was a former boxer; his failed career transformed him into a violent and abusive alcoholic. Trina's mother (Edith Garnett) became ill after bearing so many children. Some of her children were conceived during rapes by her husband. The older and sicker Edith became the more she found herself Walter's. Walter regularly punched, kicked, and verbally abused...
In 1976, 14-year-old Trina Garnett was living on the streets of Chester, Pennsylvania. She was the youngest of 12 children. Her father (Walter Garnett) was a former boxer; his failed career transformed him into a violent and abusive alcoholic. Trina's mother (Edith Garnett) became ill after bearing so many children. Some of her children were conceived during rapes by her husband. The older and sicker Edith became the more she found herself Walter's. Walter regularly punched, kicked, and verbally abused...
In 1976, 14-year-old Trina Garnett was living on the streets of Chester, Pennsylvania. She was the youngest of 12 children. Her father (Walter Garnett) was a former boxer; his failed career transformed him into a violent and abusive alcoholic. Trina's mother (Edith Garnett) became ill after bearing so many children. Some of her children were conceived during rapes by her husband. The older and sicker Edith became the more she found herself Walter's. Walter regularly punched, kicked, and verbally abused...