Tarek Framborgia is considering the purchase of a disability policy. He is currently thirty five years old and earns $50,000 per year as a quality control engineer for a major industrial company. He worries that with his moderately strenuous job responsibilities, and his potential for increasing earnings, he may not be adequately covered should an off-the-job accident keep him from continuing his career. He has come to you with the following list of problems and questions. a. If I purchase a policy that pays a fixed benefit of 90% of my current salary, how long will it be before this amount covers only 70% of my future salary if I assume salary increases of 4% per year?
b. Assuming the same policy as above, if I purchase a policy with a provision for future increases of $ 1,000 per year, how long will it cover at least 70% of my income?
c. If I assume that both my salary and the inflation rate increase at 4% per year, and that there is no floor or ceiling to my potential benefit increases because I purchase both the COLA