Bill and Pam Silver are both age 38, and they have two children, ages eight and five. Bill earns $65,000 per year, and Pam works at home with the children. The income Pam needs at the beginning of each year is $40,000, and expected annual after-tax income and benefits to her from all sources, exclusive of Bill's salary, equal $32,000. Using an annual inflation rate of 3% and an after-tax yield of 5%, what amount of life insurance is needed, if Bill were to die today, to provide an income fund for Pam assuming she expects to live to age 90 and has no expectation of retaining any of the principal?

Bill and Pam Silver are both age 38, and they have two children, ages eight and five. Bill earns $65,000 per year, and Pam works at home with the children. The income Pam needs at the beginning of each year is $40,000, and expected annual after-tax income and benefits to her from all sources, exclusive of Bill's salary, equal $32,000. Using an annual inflation rate of 3% and an after-tax yield of 5%, what amount of life insurance is needed, if Bill were to die today, to provide an income fund for Pam assuming she expects to live to age 90 and has no expectation of retaining any of the principal?

CONCEPTS IN FED.TAX.,2020-W/ACCESS

20th Edition

ISBN:9780357110362

Author:Murphy

Publisher:Murphy

Chapter1: Federal Income Taxation—an Overview

Section: Chapter Questions

Problem 44P

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