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Wendy and Frank Kampe, 30 and 35, are considering the purchase of life insurance. Wendy doesn't have any coverage whereas Frank has a $145,000 group policy at work. The Kampes have two young children, ages 3 and 5. Wendy earns $28,000 annually from a part-time home-based business. Frank's annual salary is $53,000. From their income, they save $7,200 a year. The rest goes for expenses. The couple estimates that the children will be financially dependent, except for college costs, for about another 15 years. Once the children are in college, Wendy assumes their annual expenses will be $61,568. In preparation for a visit with their insurance agent, the Kampes have estimated the following expenses if Frank were to die They also anticipate, should Frank die, receiving $8,100 a year in Social Security survivor's benefits until the youngest child turns 18, and $5,000 annually in pension funds, until Wendy turns 80. Wendy projects her gross annual income to be $39,000 after her business expansion. Once the children are self-supporting, Wendy wants to plan a spousal life income, that is, funds to make up the difference between her income and pension benefits and her expenses, for 15 more years, from age 45 to 60. Lastly, she wants to plan on $31,000 a year in retirement income for another 20 years, from age 60 to 80. She anticipates receiving a 5 percent after-tax, after-inflation return on their investments. To date, the Kampes have accumulated a total of $106,000 of assets, not including $46,000 of home equity. Their assets include $10,000 in emergency funds, $12,000 in IRA funds for Wendy, $33,000 in other investments, and $51,000 in Frank's 401(k) plan. a. What method should the Kampes use to determine how much insurance they need? a. What method should the Kampes use to determine how much insurance they need? In Step 1 of estimating their life insurance needs, the amount that the Kampes estimate will be needed for immediate needs, should Frank die, is $(Round to the nearest dollar.) In Step 2, the amount that the Kampes estimate will be needed to eliminate debt is $. (Round to the nearest dollar.) In Step 3, the amount that the Kampes estimate will be needed for immediate transitional funds is $ (Round to the nearest dollar.) In step 4, dependency expenses, the current household expenses are $ (Round to the nearest dollar.) For the Kampes, the deceased's expenses would be $ (Round to the nearest dollar.) The spousal income, or Wendy's projected income after her business expansion, is $. (Round to the nearest dollar.) The amount anticipated from Social Security Survivors' Benefits is $. (Round to the nearest dollar.) Hint: Assume the same amount will be received from Social Security until the youngest child turns 18 years old. The amount anticipated from pension benefits is $. (Round to the nearest dollar.) The income to be replaced until the children are self-supporting is $1. (Round to the nearest dollar.) The total dependency expenses, or money in today's dollars needed for dependency expenses, is $. (Round to the nearest dollar.) In step 5, the desired amount for spousal income, after the children are self-supporting, is $. (Round to the nearest dollar.) The total spousal life income, or money in today's dollars needed to provide desired spousal income, is $ (Round to the nearest dollar.) In step 6, the total educational expenses for the children is $ (Round to the nearest dollar.) In step 7, the additional desired annual income at retirement is $ (Round to the nearest dollar.) The total retirement income, or money in today's dollars needed to provide for desired retirement income, is $ (Round to the nearest dollar.) In step 8, the total funds needed in today's dollars to cover needs is $. (Round to the nearest dollar.) In step 9, the total cash from current policies is $ (Round to the nearest dollar.) The amount in retirement savings and investments is $ (Round to the nearest dollar.) The amount in other assets is $ (Round to the nearest dollar.) The total assets from step 9 is $ (Round to the nearest dollar.) In step 10, it is determined that the amount of additional life insurance that should be purchased is $ (Round to the nearest dollar.) Wendy and Frank Kampe, 30 and 35, are considering the purchase of life insurance. Wendy doesn't have any coverage whereas Frank has a $145,000 group policy at work. The Kampes have two young children, ages 3 and 5. Wendy earns $28,000 annually from a part-time home-based business. Frank's annual salary is $53,000. From their income, they save $7,200 a year. The rest goes for expenses. The couple estimates that the children will be financially dependent, except for college costs, for about another 15 years. Once the children are in college, Wendy assumes their annual expenses will be $61,568. In preparation for a visit with their insurance agent, the Kampes have estimated the following expenses if Frank were to die They also anticipate, should Frank die, receiving $8,100 a year in Social Security survivor's benefits until the youngest child turns 18, and $5,000 annually in pension funds, until Wendy turns 80. Wendy projects her gross annual income to be $39,000 after her business expansion. Once the children are self-supporting, Wendy wants to plan a spousal life income, that is, funds to make up the difference between her income and pension benefits and her expenses, for 15 more years, from age 45 to 60. Lastly, she wants to plan on $31,000 a year in retirement income for another 20 years, from age 60 to 80. She anticipates receiving a 5 percent after-tax, after-inflation return on their investments. To date, the Kampes have accumulated a total of $106,000 of assets, not including $46,000 of home equity. Their assets include $10,000 in emergency funds, $12,000 in IRA funds for Wendy, $33,000 in other investments, and $51,000 in Frank's 401(k) plan. a. What method should the Kampes use to determine how much insurance they need? a. What method should the Kampes use to determine how much insurance they need? In Step 1 of estimating their life insurance needs, the amount that the Kampes estimate will be needed for immediate needs, should Frank die, is $(Round to the nearest dollar.) In Step 2, the amount that the Kampes estimate will be needed to eliminate debt is $. (Round to the nearest dollar.) In Step 3, the amount that the Kampes estimate will be needed for immediate transitional funds is $ (Round to the nearest dollar.) In step 4, dependency expenses, the current household expenses are $ (Round to the nearest dollar.) For the Kampes, the deceased's expenses would be $ (Round to the nearest dollar.) The spousal income, or Wendy's projected income after her business expansion, is $. (Round to the nearest dollar.) The amount anticipated from Social Security Survivors' Benefits is $. (Round to the nearest dollar.) Hint: Assume the same amount will be received from Social Security until the youngest child turns 18 years old. The amount anticipated from pension benefits is $. (Round to the nearest dollar.) The income to be replaced until the children are self-supporting is $1. (Round to the nearest dollar.) The total dependency expenses, or money in today's dollars needed for dependency expenses, is $. (Round to the nearest dollar.) In step 5, the desired amount for spousal income, after the children are self-supporting, is $. (Round to the nearest dollar.) The total spousal life income, or money in today's dollars needed to provide desired spousal income, is $ (Round to the nearest dollar.) In step 6, the total educational expenses for the children is $ (Round to the nearest dollar.) In step 7, the additional desired annual income at retirement is $ (Round to the nearest dollar.) The total retirement income, or money in today's dollars needed to provide for desired retirement income, is $ (Round to the nearest dollar.) In step 8, the total funds needed in today's dollars to cover needs is $. (Round to the nearest dollar.) In step 9, the total cash from current policies is $ (Round to the nearest dollar.) The amount in retirement savings and investments is $ (Round to the nearest dollar.) The amount in other assets is $ (Round to the nearest dollar.) The total assets from step 9 is $ (Round to the nearest dollar.) In step 10, it is determined that the amount of additional life insurance that should be purchased is $ (Round to the nearest dollar.)

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