BU483 Lecture Notes - Lecture 3: Savings Account, Life Insurance, Capital Structure
Document Summary
Saving does not put capital at risk and is short term lower return. Investing puts capital at risk and is long run higher returns than saving. Two things you need to know when purchasing life insurance: Example: family with income of ,000 and 2 kids has ,000 in coverage (,000 for one, After death expenses (excluding mortgage) funeral (,000), student debt (,000), credit card (,000), car loan (,000) Income replacement (,000 per year) target income for a survivor should be 60-80% of pre- death combined gross income. Ideally, want that difference to pay out until youngest kid is 18 (15 years in this case) Wife makes ,000 already so need to make up the other ,000. Also want to index that amount to at least match inflation. In this case, the present value of this income would be ,000. Paul already has ,000 through work, so needs an additional ,000. Avg. amount of canadian coverage is ,000.
