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I have tried the question below multiple times and cannot get the right answer. can you please show me how to work the question below?
I have tried the question below multiple times and cannot get the right answer. can you please show me how to work the question below?
Question: Life Insurance Needs for a Young Married Couple
Amy and Mack Holly from Rapid City, South Dakota, have been married for three years. They recently bought a home costing $212,000 using a $190,000 mortgage. They have no other debts. Mack earns $63,000 per year, and Amy earns $74,000. Each has a retirement plan valued at approximately $18,000. They recently received an offer in the mail from their mortgage lender for a mortgage life insurance policy of $190,000. Their only life insurance currently is a $17,000 cash-value survivor-ship joint life policy. They each would like to provide the other with support for at least five years if one of them should die.
Assuming $20,000 in final expenses and $20,000 allocated to help make mortgage payments, calculate the amount of life insurance they should purchase using the needs-based approach. Also assume that both Mack and Amy would replace 75 percent of their individual current income for five years. Use a 6 percent after-tax, after-inflation rate of return for your calculations. (Use Appendix B.) Do not round your intermediate calculations. Round your answers to the nearest dollar.
- Life insurance needed (Mack): $
- Life insurance needed (Amy): $