Chapter 19.I, Problem 3TIE

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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

Explanation

**Given Information:**

It is given that the total living expenses of Norm Jaffe families are

**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.

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

**Calculation:**

Consider that the total living expenses of Norm Jaffe families are

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

The total living expenses of Norm Jaffe families are

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

The Kate his wife earns

So, the total annual sources of income is,

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

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