What is the value of the policy at the child'' 65th birthday

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Reference no: EM131157460

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:	$	910
Second birthday:	$	910
Third birthday:	$	1,010
Fourth birthday:	$	1,010
Fifth birthday:	$	1,110
Sixth birthday:	$	1,110

After the child's sixth birthday, no more payments are made. When the child reaches age 65, he or she receives $420,000.

Required:

If the relevant interest rate is 11 percent for the first six years and 7 percent for all subsequent years, what is the value of the policy at the child's 65th birthday?

Reference no: EM131157460

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