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Contemporary Mathematics for Busin...

8th Edition
Robert Brechner + 1 other
ISBN: 9781305585447

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BuyFindarrow_forward

Contemporary Mathematics for Busin...

8th Edition
Robert Brechner + 1 other
ISBN: 9781305585447
Textbook Problem

Norm Jaffe is evaluating his life insurance needs. His family's total living expenses are $54,000 per year. Kale, his wife, cams $38,000 per year in salary and receives another $5,000 per year from an endowment fund. If the prevailing interest rate is currently 5%. how much life insurance should Norm purchase to cover his dependents' income shortfall?

To determine

To calculate: The life insurance needs for The Norm Jaffe, where the total living expenses of Norm Jaffe families are $54,000 per year and the Kate his wife earns $38,000 per years in salary, receives the $5000 per year from an endowment fund. The prevailing interest rate is 5%.

Explanation

Given Information:

It is given that the total living expenses of Norm Jaffe families are $54,000 per year and the Kate his wife earns $35000 per years in salary and receives the $5000 per year from an endowment fund, where the prevailing interest rate is 5%.

Formula Used:

To calculate the value of non forfeiture as follows:

Step1: First, determine the dependents total annual living expenses included with mortgages

Step2: Determine the depends, total annual sources of income included with salaries, investments, social security

Step 3: find the income shortfall by subtract the income from the living expenses.

Incomeshortfall=Total living expensesTotal income

Step 4: finally to calculate the insurance which is needed to cover to shortfall by divided the shortfall by the prevailing the interest rate.

insuranceneeded=incomeshortfallprevailinginterestrate

Calculation:

Consider that the total living expenses of Norm Jaffe families are $54,000 per year.

First determine the dependents total annual living expenses included with mortgages.

The total living expenses of Norm Jaffe families are $54,000 per year.

Next determine the depends, total annual sources of income included with salaries, investments, social security

The Kate his wife earns $38,000 per years in salary and receives $5000 per year from an endowment fund.

So, the total annual sources of income is,

$38,000+$5,000=$43,000

Now find the income shortfall by subtract the income from the living expenses

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