Alexa is a 35-year-old accountant who earns $70,000 per year. She is married and has 3 children. She expects her salary to increase at an annual rate of 5% until her retirement at age 70 and anticipates that inflation will average 3% per year. During this time period, Alexa expects to earn 6% on her investments. Alexa and her husband's income places them in the 25% average tax bracket (including state and federal), and she uses 20% of her after-tax income for personal consumption. Using the Human-Life Value Approach, how much life insurance should Alexa purchase for herself? A. $1,348,130 B. $624,925 C. $687,716 D. $1,059.598

Alexa is a 35-year-old accountant who earns $70,000 per year. She is married and has 3 children. She expects her salary to increase at an annual rate of 5% until her retirement at age 70 and anticipates that inflation will average 3% per year. During this time period, Alexa expects to earn 6% on her investments. Alexa and her husband's income places them in the 25% average tax bracket (including state and federal), and she uses 20% of her after-tax income for personal consumption. Using the Human-Life Value Approach, how much life insurance should Alexa purchase for herself? A. $1,348,130 B. $624,925 C. $687,716 D. $1,059.598

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

am. 105.

Alexa is a 35-year-old accountant who earns $70,000 per year. She is married and has 3 children. She expects her salary to increase at an annual rate of 5% until her
retirement at age 70 and anticipates that inflation will average 3% per year. During this time period, Alexa expects to earn 6% on her investments. Alexa and her husband's
income places them in the 25% average tax bracket (including state and federal), and she uses 20% of her after-tax income for personal consumption. Using the Human-Life
Value Approach, how much life insurance should Alexa purchase for herself?
A. $1,348,130
B. $624,925
C. $687,716
D. $1,059.598

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Step 1: Calculate Alexa's future earnings until retirement.

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