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: $ 810
Second birthday: $ 810
Third birthday: $ 910
Fourth birthday: $ 910
Fifth birthday: $ 1,010
Sixth birthday: $ 1,010
After the childs sixth birthday, no more payments are made. When the child reaches age 65, he or she receives $210,000. If the relevant interest rate is 10 percent for the first six years and 6 percent for all subsequent years, what is the value of the policy at the child's 65th birthday?
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