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. For this policy, the purchaser (say, the parent) makes the following six payments to the insurance company: First birthday $ 910 Second birthday $ 910 Third birthday $ 1,010 Fourth birthday $ 850 Fifth birthday $ 1,110 Sixth birthday $ 950 After the child’s sixth birthday, no more payments are made. When the child reaches age 65, he or she receives $410,000. 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? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
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. For this policy, the purchaser (say, the parent) makes the following six payments to the insurance company: First birthday $ 910 Second birthday $ 910 Third birthday $ 1,010 Fourth birthday $ 850 Fifth birthday $ 1,110 Sixth birthday $ 950 After the child’s sixth birthday, no more payments are made. When the child reaches age 65, he or she receives $410,000. 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? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
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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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 the child’s birth. For this policy, the purchaser (say, the parent) makes the following six payments to the insurance company: |
| First birthday | $ 910 |
|---|---|
| Second birthday | $ 910 |
| Third birthday | $ 1,010 |
| Fourth birthday | $ 850 |
| Fifth birthday | $ 1,110 |
| Sixth birthday | $ 950 |
|
After the child’s sixth birthday, no more payments are made. When the child reaches age 65, he or she receives $410,000. 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? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) |
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