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	$	780
Second birthday	$	780
Third birthday	$	880
Fourth birthday	$	850
Fifth birthday	$	980
Sixth birthday	$	950

After the child’s sixth birthday, no more payments are made. When the child reaches age 65, he or she receives $280,000. If the relevant interest rate is 10 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? (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16))

Answer rating: 100% (QA)

Solution Year Cash flow DF 10 PV 0 780 1 780 1 780 0909 7... View the full answer