Julian,age 45,would like to determine how much life insurance to purchase using the human life value approach.He assumes his average annual earnings over the next 20 years will be $40,000.Of this amount,$20,000 is available annually for the support of his family.Julian will generate this income for 20 more years and he believes that 5 percent is the appropriate interest (discount)rate.The present value of one dollar payable for 20 years at a discount rate of 5 percent is $12.46.What is Julian's human life value?

Question

Quizplus · Accepted Answer

To calculate Julian's human life value using the human life value approach, we first need to determine his total earnings over the next 20 years, which is $40,000 * 20 = $800,000. We then subtract the amount he needs for his own support, which is $20,000 * 20 = $400,000. This leaves us with an income of $20,000 per year that Julian generates specifically for the support of his family. We then calculate the present value of this income stream by multiplying $20,000 by the present value factor of $12.46, which gives us a human life value of $249,200 (rounded to the nearest hundred dollars). Therefore, the best choice is B.

Julian,age 45,would Like to Determine How Much Life Insurance to Purchase