Ms. Maryanne To is seeking to calculate the amount of life insurance cover required to provide for her financial dependants on an after-tax basis. Currently Maryanne earns $45,000 p.a. after-tax and she has assessed that approximately 80% of this amount will be needed on an annual basis to support her financial dependants as income if she died in addition to an initial capital amount of $100,000 at the time of her death. After investigating the various methods available, Maryanne has decided to use the multiple approach to assist in the calculation of the relevant life insurance cover required. Given her conservative nature and that of her financial dependants, Maryanne considers that an earnings rate of 6% would be reasonable to use in any calculations and that her dependants would require financial support for a term of 25 years.
a) Calculate the life insurance cover required (to the nearest $'000) assuming that Maryanne's financial dependants would withdraw their income requirements on a monthly basis in arrears.
b) Calculate the life insurance cover required (to the nearest $'000) assuming that Maryanne's financial dependants would withdraw their income requirements on a six-monthly basis in arrears.
c) Comment on the basis for any differences in your results in parts a) and b) of this question.

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The Answer of Ms. Maryanne To is seeking to calculate the amount of life insurance cover required to provide for her financial dependants on an after-tax basis. Currently Maryanne earns $45,000 p.a. after-tax and she has assessed that approximately 80% of this amount will be needed on an annual basis to support her financial dependants as income if she died in addition to an initial capital amount of $100,000 at the time of her death. After investigating the various methods available, Maryanne has decided to use the multiple approach to assist in the calculation of the relevant life insurance cover required. Given her conservative nature and that of her financial dependants, Maryanne considers that an earnings rate of 6% would be reasonable to use in any calculations and that her dependants would require financial support for a term of 25 years.
a) Calculate the life insurance cover required (to the nearest $'000) assuming that Maryanne's financial dependants would withdraw their income requirements on a monthly basis in arrears.
b) Calculate the life insurance cover required (to the nearest $'000) assuming that Maryanne's financial dependants would withdraw their income requirements on a six-monthly basis in arrears.
c) Comment on the basis for any differences in your results in parts a) and b) of this question.

Ms Maryanne to Is Seeking to Calculate the Amount of Life