How much life insurance should be purchased

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Reference no: EM131586709

You are considering purchasing a life insurance policy for your family. Your family’s only debt is the outstanding mortgage on your house and you owe $150,000. In order for your family to live the lifestyle they are accustomed too, your family would need income of $80,000 indefinitely (ensure original capital does not decrease and the annual interest should amount to $80,000). Assuming the proceeds from the policy can earn 5 percent, how much life insurance should be purchased? Show all work.

a. $1,750,000

b. $1,600,000

c. $950,000

d. $1,500,000

Reference no: EM131586709

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