Question

Joetta Hernandez is a single parent with two children and earns ​$45,600 a year. Her​ employer's group life insurance policy would pay 2.5 times her salary. She also has $60,800 saved in a​ 401(k) plan, ​$5,067 in mutual​ funds, and a ​$3,040 CD. She wants to purchase term life insurance for 15 years until her youngest child is​ self-supporting. She is not concerned about her outstanding​ mortgage, as the children would live with her sister in the event of​ Joetta's death. Assuming she can receive a

2 percent​ after-tax, after-inflation return on insurance​ proceeds, use the earnings multiple method to calculate her insurance need. How much more insurance does Joetta need to​ buy? What other information would you need to know to use the needs approach to calculate​ Joetta's insurance​ coverage?

Assuming she can receive a 2 percent​ after-tax, after-inflation return on insurance proceeds and using the earnings multiple​ method, Joetta's insurance need is

​$________. (Round to the nearest​ dollar.)

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Answer 1

Given question is about determination of additional insurance required for joetta. Refer below images for clear solution.