Nancy and Leonard Are Married

question 169

Multiple Choice

Nancy and Leonard are married. They have two children who will be financially dependent for the next 20 years. They are taking out life insurance on Leonard, the bread winner. Nancy is sure she is able to get a 9.5% rate of return on the policy settlement. Using the earnings multiple approach calculate how much life insurance they should take out on Leonard.

• A) $1,038,225
• B) $1,704,952
• C) $549,893
• D) $301,471
• E) none of the above

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Definitions:

Self-Fulfilling Prophecy

A forecast that, either directly or indirectly, ensures its own accuracy through a positive loop between what is believed and how one acts.

Foot-In-The-Door Technique

Influence technique based on commitment, in which one starts with a small request in order to gain eventual compliance with a larger request.

Low-Ball Technique

The low-ball technique is a tactic in persuasion that involves initially presenting an attractive offer or price which is then increased after initial agreement.

Consistency

The quality of always behaving or performing in a similar way, following the same principles or course.