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Andrew is employed as a biologist for a start-up medical firm with a stable annual salary of $200,000. Kristin works part time as a pharmacist making $125,000/year. Andrew and Kristin have different levels of risk tolerance. Andrew tends to be a riskier investor and Kristin is by far more conservative. The family has no outstanding debt outside of a mortgage on their primary residence. The outstanding mortgage balance totals $280,000 against a fair market value of the home of $520,000. Their liquid assets consist of jointly held bank deposits ($10,000), mutual fund ($78,000) and combined retirement assets of $500,000. The only life insurance they own is a one year term policy on John through his employer that covers 2x his base salary. Kristin does not carry any life insurance. The family spends roughly 37% their combined base salaries on taxes, with the remainder used to provide for their family. They plan to retire at age 67. Assume a 5% opportunity cost in any analysis.The couples goals are to provide enough life insurance in the event of their premature death to provide for their children to age 18 and to provide some funds for their college education ($200,000 in total for both kids).

Please complete the following: 1) Determine the family type Andrew and Kristin represent and discuss the level of need for life insurance given this family type. 2) Calculate the amount of insurance (on one or both) they should obtain given their personal information and goals as noted above using all four methods we discussed in class. 3) Finally, what type of life insurance would you recommend they obtain and why?

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