Future Value and Multiple Cash Flows 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. The details of the policy are as follows: The purchaser (say, the parent) makes the following six payments to the insurance company:

First birthday:

£ 900 Second birthday:

£ 900 Third birthday:
£ 1,000 Fourth birthday:
£ 1,000 Fifth birthday:
£ 1,100 Sixth birthday:
£ 1,100 After the child’s sixth birthday, no more payments are made.
When the child reaches age 65, he or she receives £500,000. If the relevant interest rate is 12 per cent for the first 6 years and 8 per cent for all subsequent years, is the policy worth buying?