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: $890 $890 $990 $850 $ 1,090 $ 950 After the child's sixth birthday, no more payments are made. When the child reaches age 65, he or she receives $390,000. 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.)
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: $890 $890 $990 $850 $ 1,090 $ 950 After the child's sixth birthday, no more payments are made. When the child reaches age 65, he or she receives $390,000. 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.)
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 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:
$ 890
$ 890
Future value
$ 990
$ 850
$ 1,090
$ 950
After the child's sixth birthday, no more payments are made. When the child reaches age
65, he or she receives $390,000. 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.)
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