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 child’s birth. For this policy, the purchaser, say, the parent, makes the following six payments to the insurance company:
First birthday: ............................     $ 500
Second birthday: .......................    $ 600
Third birthday: ...........................    $ 700
Fourth birthday: ........................    $ 800
Fifth birthday: ............................    $ 900
Sixth birthday: ...........................  $1,000
After the child’s sixth birthday, no more payments are made. When the child reaches age 65, he or she receives $300,000. If the relevant rate is 11 percent for the first six years and 7 percent for all
subsequent years, is the policy worth buying?