How Much Insurance Would Be Needed in Order to Provide

question 90

Multiple Choice

How much insurance would be needed in order to provide for a family for 20 years if the pretax income necessary to cover living expenses is $50,000 and the money can be invested at 6%?

• A) $573,500
• B) $1,000,000
• C) $833,333
• D) $2,100,000

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Definitions:

Liabilities

Liabilities represent financial obligations or amounts owed by a business to creditors, which can include loans, accounts payable, mortgages, and other debts.

Accounting Equation

A fundamental principle of accounting reflecting that assets are equal to the sum of liabilities and shareholders' equity.

Trial Balance

A bookkeeping worksheet in which the balances of all ledgers are compiled into debit and credit columns to ensure a company's transactions are mathematically correct.

Debit Column

The left-hand column in an accounting journal or ledger where debits are recorded, indicating an increase in assets or expenses or a decrease in liabilities, equity, or income.