Theo is a consultant who earns 72,000$ annually. His wife, Julia is a homemaker and theey have one child, Ben. Theo is covered by 200,000$ life insurance policy. The couple assumes an annual inflation rate of 3%. How would you design a finance plan for them regarding how much life insurance they should have? NOTE: no mortgage is assumed. Theo and Julia have set the following goals and assumptions.
a) income need (readjustment period year 1) 72,000/ year
b) income need-- dependency period 42,000/year
c) income needed-- empty nest period 36,000/year
d) estate expenses and debts 15,000
e) education funding (today's dollar) 180,000 (4 years)
f) emergency fund 15,000
g) investment assets (cash/cash equivalents) 100,000
h) julia's life expectancy 85 years
i) discount rate 6%