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 details of the policy are as follows: 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: $ 920 $ 920 $1,020 $1,020 $ 1,120 $ 1,120 After the child's sixth birthday, no more payments are made. When the child reaches age 65, he or she receives $430,000. 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? Note: 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. The details of the policy are as follows: 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: $ 920 $ 920 $1,020 $1,020 $ 1,120 $ 1,120 After the child's sixth birthday, no more payments are made. When the child reaches age 65, he or she receives $430,000. 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? Note: 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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Transcribed Image Text: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 details of the policy are as follows: 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:
$ 920
$ 920
$1,020
$ 1,020
$ 1,120
$ 1,120
After the child's sixth birthday, no more payments are made. When the child reaches age 65, he or she receives $430,000.
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?
Note: Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.
Child's 65th birthday
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