An insurance company is offering a new policy to its customers. Typically, the policy is bought...
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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 purchaser (say, the parent) makes the following six payments to the insurance company: First birthday: Second birthday: Third birthday: Fourth birthday: Fifth birthday: Sixth birthday: $760 $760 Future value $ 860 $ 850 $960 $ 950 After the child's sixth birthday, no more payments are made. When the child reaches age 65, he or she receives $260,000. The relevant interest rate is 10 percent for the first six years and 7 percent for all subsequent years. Find the future value of the payments at the child's 65th birthday. (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) 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 purchaser (say, the parent) makes the following six payments to the insurance company: First birthday: Second birthday: Third birthday: Fourth birthday: Fifth birthday: Sixth birthday: $760 $760 Future value $ 860 $ 850 $960 $ 950 After the child's sixth birthday, no more payments are made. When the child reaches age 65, he or she receives $260,000. The relevant interest rate is 10 percent for the first six years and 7 percent for all subsequent years. Find the future value of the payments at the child's 65th birthday. (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
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SOLUTION To find the future value of the payments at the childs 65th birthday we can calculate the future value of each payment and then sum them up Lets break down the calculation First we need to ca... View the full answer
Related Book For
Fundamentals of Corporate Finance
ISBN: 978-0077861704
11th edition
Authors: Stephen Ross, Randolph Westerfield, Bradford Jordan
Posted Date:
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