Question 1: Future Values and Policy Evaluation (10 points) 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 $ 920 Second birthday $920

Third birthday $ 1,020

Fourth birthday$850

Fifth birthday $ 1,120 Sixth birthday $950

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 13 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? Is the policy worth buying?