No more payment is required after the seventh birthday. The policy will pay Anna's child $300,000 on her child's 60th birthday. If the relevant interest rate is 10% per year and Anna's child will live to 60 years old, is this policy worth buying? Why?

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
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Q7. Anna wants to buy an insurance plan for her newborn. To purchase the policy, Anna needs
to pay make the following payment to the insurance company.
2nd birthday: $700
3rd birthday: $800
4th birthday: $900
5th birthday: $1000
6th birthday: $1100
7th birthday: $1200
No more payment is required after the seventh birthday. The policy will pay Anna's child
$300,000 on her child's 60th birthday. If the relevant interest rate is 10% per year and Anna's
child will live to 60 years old, is this policy worth buying? Why?
Transcribed Image Text:Q7. Anna wants to buy an insurance plan for her newborn. To purchase the policy, Anna needs to pay make the following payment to the insurance company. 2nd birthday: $700 3rd birthday: $800 4th birthday: $900 5th birthday: $1000 6th birthday: $1100 7th birthday: $1200 No more payment is required after the seventh birthday. The policy will pay Anna's child $300,000 on her child's 60th birthday. If the relevant interest rate is 10% per year and Anna's child will live to 60 years old, is this policy worth buying? Why?
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