An insurance company is offering a new policy to its customers. Typically, the policy isbought by a parent or grandparent for a child at the child's birth. The purchaser (say, theparent) makes the following six payments to the insurance company:First birthday:Second birthday:Third birthday:Fourth birthday:Fifth birthday:Sixth birthday:$ 860$ 860$ 960Future value$850$ 1,060$950After the child's sixth birthday, no more payments are made. When the child reaches age65, he or she receives $360,000. The relevant interest rate is 10 percent for the first sixyears and 7 percent for all subsequent years. Find the future value of the payments atthe child's 65th birthday. (Do not round intermediate calculations and round youranswer to 2 decimal places, e.g., 32.16.)

Future value is the value of today money to be received in the future and that includes the deposit…

Answered: urance company is offering a new policy…

SWFT Comprehensive Vol 2020

43rd Edition

ISBN:9780357391723

Author:Maloney

Publisher:Maloney

Chapter5: Gross Income: Exclusions

Section: Chapter Questions

Problem 5DQ

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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: 910 $910 First birthday: Second birthday: Third birthday: Fourth birthday: $ 1,010 $ 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. 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? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) Child's 65th birthday
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