Carlos's wife earns $11,600 per year. If Carlos dies, his family would require $57,900 to cover their living expenses. Some of the yearly expenses would be offset by $29,200 from stock dividends, but this is still not enough. How much insurance should Carlos have to cover the shortfall, given a 13.7% prevailing interest rate?

Question

Quizplus · Accepted Answer

The shortfall is $57,900 - $11,600 - $29,200 = $17,100. To cover this shortfall with a 13.7% interest rate, Carlos needs insurance of $17,100 / 0.137 = $124,818.98, which rounds to $125,000.

Carlos's Wife Earns $11,600 Per Year