are_142_winter_08_ps3key2

# are_142_winter_08_ps3key2 - Name SID ARE 142 Winter Eric...

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Name_____________________________________ SID_______________________________________ ARE 142 Josh Hanosh Winter Phil “Trouble” Huppe Eric Johnson PROBLEM SET #3 DUE: Monday, March 17th at 7:10pm (No late homework will be accepted) SHOW ALL WORK TO RECEIVE FULL CREDIT! Life Insurance Margret and Ben just got back from visiting their local life insurance agent. Margret and Ben must decide how much life insurance they should purchase based on their families present and future financial needs. They have two kids, one is 9 and the other is 17. Margret and Ben have two investment accounts worth \$300,000 each. Additionally, the family has a rental property that is has \$100,000 in equity. (that means they can sell it and cash out \$100,000) They also have \$20,000 in a high yield savings account. Their 17 year old daughter has a college fund that is worth \$90,000 and will be using the account for school purposes only . Their 9 year old son also has a college fund worth \$34,000. Ben and Margret put \$6000 (together, not each) a year into their son's college fund. Currently the family spends \$24,000 a year in mortgage expenses (this includes principle reduction and interest expense) and \$60,000 a year on all other expenses. Ben makes \$120,000, while Margret makes \$40,000 (both figures are after taxes). Assume, for the sake of simplicity, that all investments of the deceased are transferred into the same account as the insurance policy lump sum. Assume they can earn 6% per year all of their investments . A.) If Ben were to die today, what are the yearly expenses (including contributions to investments) not covered by Margret's salary? Yearly Expenses Including Contributions to Investments: \$24,000 + \$60,000 + \$6000

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are_142_winter_08_ps3key2 - Name SID ARE 142 Winter Eric...

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