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: Second birthday: Third birthday: Fourth birthday: Fifth birthday: Sixth birthday: $ 1,060 $ 1,060 After the child's sixth birthday, no more payments are made. When the child reaches age 65, he or she receives $120,000. If the relevant interest rate is 9 percent for the first six years and 5 percent for all subsequent years, what is the value of the policy at the child's 65th birthday? Note: Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16. Child's 65th birthday $ 860 $ 860 $ 960 $ 960
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: Second birthday: Third birthday: Fourth birthday: Fifth birthday: Sixth birthday: $ 1,060 $ 1,060 After the child's sixth birthday, no more payments are made. When the child reaches age 65, he or she receives $120,000. If the relevant interest rate is 9 percent for the first six years and 5 percent for all subsequent years, what is the value of the policy at the child's 65th birthday? Note: Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16. Child's 65th birthday $ 860 $ 860 $ 960 $ 960
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:
eBook
First birthday:
Second birthday:
Third birthday:
$ 860
$ 860
$ 960
$ 960
Fourth birthday:
Fifth birthday:
Sixth birthday:
After the child's sixth birthday, no more payments are made. When the child reaches age 65, he or she receives $120,000.
If the relevant interest rate is 9 percent for the first six years and 5 percent for all subsequent years, what is the value of the policy at
the child's 65th birthday?
Note: Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.
Child's 65th birthday
$ 1,060
$ 1,060
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