HACE 3200 1nd Edition Lecture 20Outline of Last Lecture I. ClausesII. RidersIII. Health CareOutline of Current Lecture I. Practice ProblemsCurrent Lecture- LIFE INSURANCE PRACTICE PROBLEMS- 1. Grace’s aunt Selina passed away. Grace was named the sole beneficiary to her- life insurance policy. The policies face value is $980,000. Rather than take a- lump sum amount, Grace has elected to accept annual annuity payments from the- policy. She anticipates interest being credited to the account in the amount of- 8.5% annually. If Grace receives annual payments of $85,000, how many- payments will she receive?o PVA = 980,000, I/Y = 8.5, PMT = 85,000; CPT N = 47.95 YRS- 2. Joetta is a single parent with two children and earns $45,000 per year. Her- employer’s group life insurance policy would pay 2.5 times her salary. She also- has $60,000 saved in a 401(k) plan, $5,000 in mutual funds and a $3,000 CD that could be used to provide for her children. She wants to purchase term life insurance for 15 years until her youngest child is self-supporting. Assuming she can receive a 3% rate of return on insurance proceeds, use the earnings multiple approach to calculate how much more insurance Joetta should buy.o 45,000*2.5 = 112,500+60,000(401K)+5,000(MF)+3,000(CD) = 180,500.45,000*.74(26% DROP) = $33,300 PMT, N = 15, 3% = I/Y. CPT PVA. PVA = 397,533.24 – 180,500(PREVIOUS SECURITY) = $217,033.24 TO INSURE.- 3. Cedric has a $150,000 whole life insurance policy with $35,000 cash value. He- decides to borrow $15,000 against the policy. If Cedric dies and has only paid- back $7,000. How much will his beneficiaries receive? These notes represent a detailed interpretation of the professor’s lecture. GradeBuddy is best used as a supplement to your own notes, not as a substitute.o 150,000. BORROWED = 15,000; PAID = 7,000; OWES = 8,000.150,000 – 8,000 = BENEFICIARY RECEIVES $142,000. - 4. Oliver’s uncle Rodrick passed away. Oliver was named the sole beneficiary to his- life insurance policy. The policies face value is $470,000. Rather than take a- lump sum amount, Oliver has elected to accept annual annuity payments from the- policy. He anticipates interest being credited to the account in the amount of- 7.8% annually. If Oliver receives annual payments of $75,000, how many- payments will he receive?o PVA = 470,000, I/Y = 7.8, PMT = -75,000; CPT N = 8.933 YRS.- 5. Alice and Robbie have 8-year-old triplets. Robbie earns $78,000 per year. Alice- works part time and earns $16,000 per year. They intend to purchase term life- policies for 15 years until the children are self supporting. They anticipate a rate- of return on the settlement of 6.5%. Using the earnings multiple approach- calculate how much individual life insurance should be taken out on each parent.o ROBBIE = 78,000*.8(20% DROP) = 62,400 PMT. ALICE = 16,000*.8 = 12,800.I/Y = 6.5; N = 15; CPT PVA. ROB = 586,726.54; ALICE = 120,354.16.- 6. Barbara is a single parent with three children and earns $65,000 per year. Her- employer’s group life insurance policy would pay 2.0 times her salary. She also- has $80,000 saved in a 401(k) plan, $15,000 in mutual funds and a $6,000 CD.- She wants to purchase term life insurance for 10 years until her youngest child is- self-supporting. Assuming she can receive an 8% rate of return on insurance- proceeds, use the earnings multiple approach to calculate how much more- insurance Barbara should buy.o 65,000*2 = 130,000+80,000+15,000+6,000 = 231,000; I/Y = 8, N = 10- PMT = 65,000*.78 = 50,700. CPT PVA = 340,201.13 – 231,000 = 109,201.13.- 7. Leslie’s uncle Albert passed away. Leslie was named the sole beneficiary to his- life insurance policy. The policies face value is $500,000. Rather than take a- lump sum amount, Leslie has elected to accept 20 annuity payments from the- policy. She anticipates interest being credited to the account in the amount of 8%- annually. What will be Leslie’s annual annuity payments from this policy?o PVA = 500,000, N = 20, I/Y = 8; CPT PMT = $50,926.10. - 8. Smendrake’s uncle Umberto passed away. Smendrake was named the sole- beneficiary to his life insurance policy. The policies face value is $850,000.- Rather than take a lump sum amount, Smendrake has elected to accept 25 annuity- payments from the policy. He anticipates interest being credited to the account in- the amount of 7.2% annually. What will be Smendrake’s annual annuity- payments from this policy?o PVA = 850,000, N = 25, I/Y = 7.2; PMT =