Susan and Raphael Galego have completed Step 1 of their needs analysis worksheet and determined that they need $3,522,000 to maintain the projected lifestyle of Raphael (age 41) and their two children (ages 7 and 11) in the event of Susan’s (the primary earner’s) death. The Galegos also have certain financial resources available after Susan’s death, however, so their life insurance needs are lower than this amount. If Susan dies, Raphael will be eligible to receive Social Security survivors’ benefits—approximately $3,500 a month ($42,000 a year) until the youngest child graduates from high school in 9 years. After the children leave home, Raphael will be able to work full-time and earn an estimated $52,000 a year (after taxes) until he retires at age 65. After Raphael turns 65, he’ll receive approximately $3,100 a month ($37,200 a year) from his own Social Security and retirement benefits. The life expectancy for a man within Raphael’s demographic is 80. The couple has also saved $42,300 in a mutual fund, and Susan’s employer provides her a $100,000 life insurance policy. Using this information, complete Step 2 of the needs analysis worksheet to estimate their total financial resources available after death. (Note: If the value of a certain entry is zero, be sure to enter “0” to receive credit.) Life Insurance Needs Analysis Worksheet (Part 2) Step 2: Financial Resources Available After Death 1. Income Period 1 Period 2 Period 3 a. Annual Social Security survivors’ benefits $42,000 $0 $0 b. Surviving spouse’s annual income $0 $0 c. Other annual pensions and Social Security benefits $0 $0 $37,200 d. Annual income (1a + 1b + 1c) $42,000 e. Number of years in time period 9 15 15 f. Total period income (1d x 1e) $378,000 g. Total income $1,716,000 2. Savings and investments 3. Other life insurance 4. Other resources $0 Total financial resources available (1g + 2 + 3 + 4): $1,858,300

Susan and Raphael Galego have completed Step 1 of their needs analysis worksheet and determined that they need $3,522,000 to maintain the projected lifestyle of Raphael (age 41) and their two children (ages 7 and 11) in the event of Susan’s (the primary earner’s) death. The Galegos also have certain financial resources available after Susan’s death, however, so their life insurance needs are lower than this amount. If Susan dies, Raphael will be eligible to receive Social Security survivors’ benefits—approximately $3,500 a month ($42,000 a year) until the youngest child graduates from high school in 9 years. After the children leave home, Raphael will be able to work full-time and earn an estimated $52,000 a year (after taxes) until he retires at age 65. After Raphael turns 65, he’ll receive approximately $3,100 a month ($37,200 a year) from his own Social Security and retirement benefits. The life expectancy for a man within Raphael’s demographic is 80. The couple has also saved $42,300 in a mutual fund, and Susan’s employer provides her a $100,000 life insurance policy. Using this information, complete Step 2 of the needs analysis worksheet to estimate their total financial resources available after death. (Note: If the value of a certain entry is zero, be sure to enter “0” to receive credit.) Life Insurance Needs Analysis Worksheet (Part 2) Step 2: Financial Resources Available After Death 1. Income Period 1 Period 2 Period 3 a. Annual Social Security survivors’ benefits $42,000 $0 $0 b. Surviving spouse’s annual income $0 $0 c. Other annual pensions and Social Security benefits $0 $0 $37,200 d. Annual income (1a + 1b + 1c) $42,000 e. Number of years in time period 9 15 15 f. Total period income (1d x 1e) $378,000 g. Total income $1,716,000 2. Savings and investments 3. Other life insurance 4. Other resources $0 Total financial resources available (1g + 2 + 3 + 4): $1,858,300

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Question

If Susan dies, Raphael will be eligible to receive Social Security survivors’ benefits—approximately $3,500 a month ($42,000 a year) until the youngest child graduates from high school in 9 years. After the children leave home, Raphael will be able to work full-time and earn an estimated $52,000 a year (after taxes) until he retires at age 65. After Raphael turns 65, he’ll receive approximately $3,100 a month ($37,200 a year) from his own Social Security and retirement benefits. The life expectancy for a man within Raphael’s demographic is 80. The couple has also saved $42,300 in a mutual fund, and Susan’s employer provides her a $100,000 life insurance policy.

Using this information, complete Step 2 of the needs analysis worksheet to estimate their total financial resources available after death. (Note: If the value of a certain entry is zero, be sure to enter “0” to receive credit.)

Life Insurance Needs Analysis Worksheet (Part 2)

Step 2: Financial Resources Available After Death
1. Income
	Period 1	Period 2	Period 3
a. Annual Social Security survivors’ benefits	$42,000	$0	$0
b. Surviving spouse’s annual income	$0		$0
c. Other annual pensions and Social Security benefits	$0	$0	$37,200
d. Annual income (1a + 1b + 1c)	$42,000
e. Number of years in time period	9	15	15
f. Total period income (1d x 1e)	$378,000
g. Total income				$1,716,000
2. Savings and investments
3. Other life insurance
4. Other resources				$0
Total financial resources available (1g + 2 + 3 + 4):				$1,858,300

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