Adriana is financially responsible for her aged parents.She wants to provide income for her parents for 15 years should she die.Adriana earns $48,000 after taxes and believes that her parents could live on 60 percent of her current income.If the insurance funds could be invested at 4 percent after taxes and inflation,how much life insurance does Adriana need? The approximate interest factor is 11.9.

Question

Quizplus · Accepted Answer

Adriana's parents need 60% of her current income of $48,000, which is $28,800 annually. Over 15 years, without considering the interest, this totals $432,000. However, with an investment return of 4%, the actual amount needed is lower due to the interest earned over time. Using the approximate interest factor of 11.9 for calculating the present value of an annuity, the required life insurance amount is $28,800 * 11.9 = $342,720.

Adriana Is Financially Responsible for Her Aged Parents