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17.7 Review and Practice
- Why is the time period observed in life table calculation important?
- How can the economic value of life be calculated? What does the result mean?
- What income streams should be taken into consideration when assessing economic value by the PV method?
- Using the PV method, what is the economic value of a forty-year-old man who earns an average annual income of $130,000 for his lifetime at an interest rate of 3 percent?
- Why might the results of the family needs analysis and the PV method of determining economic value be so similar?
- If both the PV value and needs analysis methods produce similar results with respect to a person’s economic value, why aren’t life insurance products typically made available at these amounts?
- Do you see any fundamental problems with the methods of estimating economic value, other than ethical considerations?
- Distinguish between select and ultimate tables.
- Mary Koonce describes herself as an optimist who does not wish to dwell on the unpleasant what-ifs in life. She is urged by her financial planner to perform a family needs analysis to insure against the risk of premature death. Mary insists this is unnecessary because she already made such an assessment ten years ago and has a life insurance policy guaranteeing a $250,000 death benefit. Mary is divorced, has two teenage sons and a seven-year-old daughter, and purchased her first home a year ago. Do you agree with Mary’s judgment regarding her needs analysis? If you were her financial advisor, what would you tell her?
- In light of the significant demographic changes taking place in global populations, do world governments have a greater responsibility to provide for the retirement of their aged citizens, directly or indirectly? Why or why not?
- Can you conclude from the World Health Organization statistics on medical costs that greater spending on health and wellness has a positive impact on longevity and/or mortality? Why or why not?