Determining the relevant interest rate

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Suppose Lifetime Insurance Company is offering a new policy to the parents of new born babies. The parent will pay $1,000 per year starting on the babies first birthday and will continue until her fifth birthday. After that, no more payments will be made. When the child reaches age 65, he or she receives $500,000. If the relevant interest rate is 10 percent for the ?rst five years and 8 percent for all subsequent years, is the policy worth buying?

Reference no: EM132389669

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