u are considering a few personal investment issues. n finance, human capital of an investor is defined as the present value of all the future earnings of this person. For young investors, human capital usually constitutes a large percentage of their total wealth. Human capital is subject to mortality risk—the likelihood that the investor dies prematurely and therefore loses all the labor income of subsequent working years. The loss of an investor's human capital is borne by his/her family. The life insurance policy provides protection against mortality risk. Which of the following is likely to be the best life insurance choice for you and your spouse? a. Buy a small life policy in the beginning and gradually increase the death benefit as you and your spouse age. b.Buy a large life policy in the beginning and gradually reduce the death benefit as you and your spouse age. c.Buy a life policy with the death benefit you see fit in the beginning and keep the death benefit unchanged as you and your spouse age. d.Do not consider buying a life policy until you and your spouse retire.
Suppose you are 28 and married. You and your spouse file for income taxes jointly. You are in the 25% tax bracket. You are considering a few personal investment issues.
n finance, human capital of an investor is defined as the present value of all the future earnings of this person. For young investors, human capital usually constitutes a large percentage of their total wealth. Human capital is subject to mortality risk—the likelihood that the investor dies prematurely and therefore loses all the labor income of subsequent working years. The loss of an investor's human capital is borne by his/her family. The life insurance policy provides protection against mortality risk. Which of the following is likely to be the best life insurance choice for you and your spouse?
a. Buy a small life policy in the beginning and gradually increase the death benefit as you and your spouse age.
b.Buy a large life policy in the beginning and gradually reduce the death benefit as you and your spouse age.
c.Buy a life policy with the death benefit you see fit in the beginning and keep the death benefit unchanged as you and your spouse age.
d.Do not consider buying a life policy until you and your spouse retire.
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