May insurance company is offering a new policy to its long-term customers. Typically, the policy...
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May insurance company is offering a new policy to its long-term 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: $ 800 Second birthday: $ 800 Third birthday: $ 900 Fourth birthday: $ 900 Fifth birthday: $1,000 Sixth birthday: $1,000 After the child's sixth birthday, no more payments are made. When the child reaches age 65, he or she receives $150,000. If the relevant interest rate is 9 percent for the first six years and 5.5 percent for all subsequent years, is the policy worth buying? 25 points ***Unless you provide detailed computations and interpretations, you get 0/25 points
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