Six payments to the insurance company

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Reference no: EM131448244

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?

Reference no: EM131448244

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