Margit Seniors is an insurance company offering a new policy to its long-term customers. Typically,...
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Margit Seniors is an insurance company offering a new policy to its long-term customers. Typically, the policy is bought by a parent or grandparent for a child at the childs 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: $ 800 Second birthday: $ 800 Third birthday: $ 900 Fourth birthday: $ 900 Fifth birthday: $1,000 Sixth birthday: $1,000 After the childs sixth birthday, no more payments are made. When the child reaches age 60, he or she receives $148,000. If the relevant interest rate is 9 percent for the first six years and 5.8 percent for all subsequent years, is the policy worth buying?
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