Reference no: EM131107917
Wendy and Frank Kampe, 30 and 35, are considering the purchase of life insurance. Wendy doesnAc€?ct have any coverage whereas Frank has a $150,000 group policy at work. The Kampes have two young children, ages 3 and 5. Wendy earns $28,000 annually from a part-time, home-based business. FrankAc€?cs annual salary is $55,000. From their income, they save $7,500 annually. The rest goes for expenses. The couple estimates that the children will be financially dependent for another 20 years.
In preparation for a visit with their insurance agent, the Kampes have estimated the following expenses if Frank were to die:
Immediate needs at death
|
$25,000
|
Outstand debt (including mortgage payment)
|
$90,000
|
Transitional funds for Wendy to expand her business to fully support the family
|
$15,000
|
College expenses for their two children
|
$205,000
|
They also anticipate, should Frank die, receiving $8,000 a year in Social Security survivorAc€?cs benefits until the youngest child turns 18, and $5,000 annually in pension benefits, until Wendy turns 80. Wendy projects her gross annual income to be $40,000 after her business expansion. Once the children are self-supporting, Wendy wants to plan a spousal life income for 10 more years, from age 50 to age 60, plus retirement income for another 20 years from age 60 to age 80. She anticipates receiving a 5 percent after-tax, after-inflation return on their investments.
To date, the Kampes have accumulated a total of $107,000 of assets, not including $45,000 home equity. Their assets include$10,000 considered as an emergency fund, $12,000 of IRA funds for Wendy, $35,000 in other investments, and $50,000 in FrankAc€?cs employer 401(K) plan.
Questions:
Using the needs approach, estimate the amount of additional life insurance, if any, that the Kampes should purchase to protect Wendy if Frank should die.
Should Wendy purchase an insurance policy? Why or why not? If so, what type of policy would you recommend for Wendy?
What type of life insurance policy would you recommend that Frank purchase?
What would happen to FrankAc€?cs group life insurance if he leaves his present job?
What could happen to the KampesAc€?c children if Frank or Wendy should die without adequate life insurance coverage?
Should the Kampes name the children as life insurance beneficiaries?
Which life insurance riders might the Kampes select when purchasing a policy?
Since they will make a concerted effort to become informed about life insurance, should they also purchase life insurance on the children, rather than waiting until later when they would have to reeducate themselves for life insurance shopping?
What are the elements of the preparedness cycle
: What are the elements of the preparedness cycle? What does evacuation planning involve? Explain the importance of how "evacuation planning" is incorporated into the preparedness cycle.
|
Under pressure to increase market share
: Bold's product manager is under pressure to increase market share, but is uncertain about how to make the product more competitive. The product is reasonably well-positioned in the Thrift segment and enjoys relatively high awareness and accessibil..
|
Describes a foreign policy
: "We believe in nonaggression and noninterference by one country in the affairs of another and the growth of tolerance between them and the capacity for peaceful coexistence
|
World biggest producer of roses
: Colombia is the world's biggest producer of roses. The global demand for roses increases and at the same time Columbia's central bank increases the interest rate. In the foreign exchange market for Colombian pesos, what happens to The demand for p..
|
In preparation for a visit with their insurance agent
: Wendy and Frank Kampe, 30 and 35, are considering the purchase of life insurance. Wendy doesnAc€?ct have any coverage whereas Frank has a $150,000 group policy at work. The Kampes have two young children, ages 3 and 5.
|
What programs are available to help the local business
: What does the emergency manager have to tell the local business community about a business continuity plan? What programs are available to help the local business in this endeavor? Give examples.
|
Classify goods by category-private-public-common-monopoly
: Classify the following goods by category (private, public, common, monopoly) and explain why:
|
Always quoted on an annual basis unless otherwise specified
: Suppose the spot rates for 1 and 2 years are s1=6.3% and s2=6.9% with annual compounding. Recall that in this course interest rates are always quoted on an annual basis unless otherwise specified. What is the discount rate d(0,2)?
|
Can you find a three equation system with 4 states
: Using the arbitrage theorem, write down a three-equation system with two states that gives the arbitrage-free values of Sr and Ct. Now plot a two-step binomial tree for St. suppose at every node of the tree the markets are arbitrage-free. How many th..
|