Question
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
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 | $ | 830 |
Second birthday | 830 | |
Third birthday | 930 | |
Fourth birthday | 850 | |
Fifth birthday | 1,030 | |
Sixth birthday | 950 | |
After the childs sixth birthday, no more payments are made. When the child reaches age 65, he or she receives $330,000. If the relevant interest rate is 10 percent for the first six years and 7 percent for all subsequent years, what would the value of the deposits be when the policy matures? |
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