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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

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: $ 880
Second birthday: $ 880
Third birthday: $ 980
Fourth birthday: $ 980
Fifth birthday: $ 1,080
Sixth birthday: $ 1,080

After the childs sixth birthday, no more payments are made. When the child reaches age 65, he or she receives $420,000.

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?

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