An Insurance company is offering a new policy to its customers. Typically, the policy isbought by a parent or grandparent for a child at the child's birth. The purchaser (say, theparent) makes the following six payments to the insurance companyFirst birthday:Second birthdayThird birthday:Fourth birthdayFifth birthday:Sixth birthday.$ 800$800$ 900$ 900Future value$1,000$ 1,000After the child's sixth birthday, no more payments are made. When the child reaches age65, he or she receives $350,000. The relevant interest rate is 10 percent for the first sixyears and 7 percent for all subsequent years. Calculate the future value of the paymentsat the child's 65th birthday. (Do not round intermediate calculations and round youranswer to 2 decimal places, e.g., 32.16.)

Future value is the value of today money to be received in the future and that includes the deposit…

Answered: Ah Insurance company is offering a new…

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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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 the child's birth. The purchaser (say, the parent) makes the following six payments to the insurance company: First birthday: Second birthday: Third birthday: Fourth birthday: Fifth birthday: Sixth birthday: $ 860 $ 860 $ 960 Future value $850 $ 1,060 $950 After the child's sixth birthday, no more payments are made. When the child reaches age 65, he or she receives $360,000. The relevant interest rate is 10 percent for the first six years and 7 percent for all subsequent years. Find the future value of the payments at the child's 65th birthday. (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
On May 4 Ariel signed a simple discount note for $3,500 at 31/2% for 60 days. Calculate the proceeds she will receive on May 4. Calculate the amount she will pay at maturity Determine the date it will be due.
Ahlam invests a certain fund worth OMR 6,000 in Bank Muscat for 3 years. At the end of this period, she obtains an amount of OMR 7,500. What is the interest amount offered by the bank to Ahlam? a. OMR 1,500 b. OMR 2,000 c. OMR 13,500 d. OMR 500
Larry purchased an annuity from an insurance company that promises to pay him $6,500 per month for the rest of his life. Larry paid $626,340 for the annuity. Larry is in good health and is 72 years old. Larry received the first annuity payment of $6,500 this month. Use the expected number of payments in Exhibit 5-1 for this problem. Problem 5-59 Part-a (Algo) a. How much of the first payment should Larry include in gross income?
A company charges a net single premium of S6,000 for a life insurance policy with face amount $25,000. The force of interest for this policy is 4 Find the probability that the company makes a profit if Benefit paid at the moment of death and the survival function is So(t) = 1- for 0
Suppose that the parents of a young child decide to make annual deposits into a saving account, with the first deposit being made on the child's fifth birthday and the last deposit being made on the 15th birthday. Then, starting on the child's 18th birthday (EOY), four withdrawals will be made. The sequence of the amounts of withdrawals is $2000, $2400, $2800, and $3200. If the effective annual interest rate is 8% during this period, what are the annual deposits in years 5 through 15? Use a uniform gradient amount in your solution and support your work by drawing the cash flow diagram. Draw the cash flow diagram and solve the problem. Upload your answer in the moodle. Answer: D Fir
Your parents contribute $180 monthly to a college savings plan for you that earns 5.4% compounded monthly. The first deposit was exactly 18 years ago. Find the account balance immediately after today’s monthly deposit and crediting of interest. Question 17Select one: a. $65,975 b. $59,689 c. $45,589 d. $72,096 e. $69,456
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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 the child's birth. The purchaser (say, the parent) makes the following six payments to the insurance company: First birthday: Second birthday: Third birthday: Fourth birthday: Fifth birthday: Sixth birthday: $ 880 $ 880 $980 $850 $ 1,080 $950 After the child's sixth birthday, no more payments are made. When the child reaches age 65, he or she receives $380,000. The relevant interest rate is 11 percent for the first six years and 7 percent for all subsequent years. Find the future value of the payments at the child's 65th birthday. (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) Future value
Your child's orthodontist offers you two alternative payment plans. The first plan requires a $4,000 immediate up-front payment. The second plan requires you to make monthly payments of $137.41, payable at the end of each month for 3 years. What nominal annual interest rate is built into the monthly payment plan? a. 15.25% b. 7.34% c. 25.86% d. 11.42% e. 14.36%
5. Jim lends $8000 to Sally on September 23, 2006. Sally signs a promissory note, with the note due in 10 months. The maturity value of the note is $8695. Jim sells the note to a bank on February 23, 2007. If the bank wishes to earn 4%4%, what price does Jim get for the note?
Kia deposited $1,100, at the BEGINNING of each year for 25 years in a credit union account. If the account paid 8% interest, compounded annually, use the appropriate formula to find the future value of her account. A. $73,441.24 B. $80,416.53 C. $86,849.86 D. $87,949.86

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