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: $ 820 Second birthday: $ 820 Third birthday: $ 920 Fourth birthday: $ 850 Fifth birthday: $ 1,020 Sixth birthday: $ 950 After the child’s sixth birthday, no more payments are made. When the child reaches age 65, he or she receives $320,000. 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.

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: $ 820 Second birthday: $ 820 Third birthday: $ 920 Fourth birthday: $ 850 Fifth birthday: $ 1,020 Sixth birthday: $ 950 After the child’s sixth birthday, no more payments are made. When the child reaches age 65, he or she receives $320,000. 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.

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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First birthday:	$ 820
Second birthday:	$ 820
Third birthday:	$ 920
Fourth birthday:	$ 850
Fifth birthday:	$ 1,020
Sixth birthday:	$ 950

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