Frank is a consultant who earns $72,000 annually. His spouse, Julie is a homemaker, and...
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Frank is a consultant who earns $72,000 annually. His spouse, Julie is a homemaker, and they have one child, Betty. Frank is covered by $200,000 life insurance policy. The couple assumes an average annual inflation rate of 3%. How would you design a financial plan for them regarding how much life insurance they should have? NOTE no mortgage is assumed.
Frank and Julie have set the following goals and assumptions:
a. Income need (re-adjustment period 1 year) $72,000 year
b. Income needdependency period $42,000 year
c. Income neededempty nest period $36,000 year
d. Estate expenses and debts $15,000
e. Education funding (todays dollars) $180,000 (4 years)
f. Emergency fund $15,000
g. Investment assets (cash/cash equivalents) $100,000
h. Julies life expectancy 85 years
i. Discount rate 6%
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