What would the value of the deposits be

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Reference no: EM131927861

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 $ 950 Second birthday $ 950

Third birthday $ 1,050 Fourth birthday $ 850 Fifth birthday $ 1,150 Sixth birthday $ 950 After the child's sixth birthday, no more payments are made.

When the child reaches age 65, he or she receives $450,000.

If the relevant interest rate is 15 percent for the first six years and 7 percent for all subsequent years, what would the value of the deposits be when the policy matures?

Reference no: EM131927861

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