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: $ 900 Second birthday: $ 900 Third birthday: $ 1,000 Fourth birthday: $ 1,000 Fifth birthday: $ 1,100 Sixth birthday: $ 1,100 After the child’s sixth birthday, no more payments are made. When the child reaches age 65, he or she receives $231,000. If the relevant interest rate is 9 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? 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: $ 900 Second birthday: $ 900 Third birthday: $ 1,000 Fourth birthday: $ 1,000 Fifth birthday: $ 1,100 Sixth birthday: $ 1,100 After the child’s sixth birthday, no more payments are made. When the child reaches age 65, he or she receives $231,000. If the relevant interest rate is 9 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? 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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Problem 5-60 Future Value and Multiple Cash Flows [LO 1]
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: | $ 900 |
|---|---|
| Second birthday: | $ 900 |
| Third birthday: | $ 1,000 |
| Fourth birthday: | $ 1,000 |
| Fifth birthday: | $ 1,100 |
| Sixth birthday: | $ 1,100 |
After the child’s sixth birthday, no more payments are made. When the child reaches age 65, he or she receives $231,000.
If the relevant interest rate is 9 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?
Note: Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.
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