An insurance company is offering a new policy to its customers. Typically, the policy is...
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An insurance company is offering a new policy to its customers. Typically, the policy is bought by a parent or grandparent for a child at the childs birth. The details of the policy are as follows: The purchaser (say, the parent) makes the following six payments to the insurance company: First birthday: $ 760 Second birthday: $ 760 Third birthday: $ 860 Fourth birthday: $ 860 Fifth birthday: $ 960 Sixth birthday : $960 After the childs sixth birthday, no more payments are made. When the child reaches age 65, he or she receives $360,000.
If the relevant interest rate is 12 percent for the first six years and 7 percent for all subsequent years, what is the value of the policy at the child's 65th birthday?
Note: Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.
| First birthday: | $ 760 |
|---|---|
| Second birthday: | $ 760 |
| Third birthday: | $ 860 |
| Fourth birthday: | $ 860 |
| Fifth birthday: | $ 960 |
| Sixth birthday : $960 After the childs sixth birthday, no more payments are made. When the child reaches age 65, he or she receives $360,000. If the relevant interest rate is 12 percent for the first six years and 7 percent for all subsequent years, what is the value of the policy at the child's 65th birthday? Note: Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16. |
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