How much insurance would be needed in order to provide for a family for 20 years if the pretax income necessary to cover living expenses is $50,000 and the money can be invested at 6%?

Question

Quizplus · Accepted Answer

To find the present value of an annuity that provides $50,000 per year for 20 years at a 6% interest rate, we use the present value of annuity formula: PV = Pmt × [(1 - (1 + r)^-n) / r]. Plugging in the values: PV = $50,000 × [(1 - (1 + 0.06)^-20) / 0.06] = $573,496.57, which is approximately $573,500.

How Much Insurance Would Be Needed in Order to Provide