Future Value And Multiple Cash Flows An Insurance Company Is

Future Value and Multiple Cash Flows 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: $ 800

Second birthday: $ 800

Third birthday: $ 900

Fourth birthday: $ 900

Fifth birthday: $1,000

Sixth birthday: $1,000

After the child’s sixth birthday, no more payments are made. When the child reaches age 65, he or she receives $350,000. If the relevant interest rate is 11 percent for the first six years and 7 percent for all subsequent years, is the policy worth buying?

Posted in Uncategorized