Sarah Is Using the Needs Approach to Determine How Much

question 38

Multiple Choice

Sarah is using the needs approach to determine how much life insurance to buy.Her cash needs are $30,000;her income needs are $140,000;and special needs are $100,000.Sarah has the following assets: $20,000 in bank accounts,$30,000 in retirement plans,and $40,000 in investment accounts.Sarah owns no individual life insurance.She is covered by a $50,000 group life insurance policy through her employer.Based on this information,how much additional life insurance should Sarah purchase?

• A)$80,000
• B)$130,000
• C)$150,000
• D)$160,000

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Definitions:

Financial Goal

A specific monetary target to save, invest, or spend money within a definite period, guiding financial planning and decision-making.

Corporation

is a legal entity that is separate and distinct from its owners, providing them with limited liability, and it has the ability to enter into contracts, loan and borrow money, sue and be sued, and pay taxes.

Financial Assets

Economic resources or ownerships that are convertible into cash or will generate cash in the future, such as stocks or bonds.

Capital

In finance, it refers to the financial assets or resources that individuals or enterprises use for investing, producing goods, or services.