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    Insurance Policy Value

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    A well-known insurance company offers a policy for children. Typically, a parent or grandparent buys a policy for a child at the child's birth. the details of the policy are as follows. The purchaser makes the following six payments to the insurance company:

    1st birthday: $750
    2nd birthday: $750
    3rd birthday: $750
    4th birthday: $800
    5th birthday: $800
    6th birthday: $800

    No more payments are made after the child's sixth birthday. When the child reaches the age of 65, he or she receives $250,000. If the relevant interest rate is 6% for the first 6 years and 7% for all subsequent years, is the policy worth buying? (Must use Microsoft Excel)

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    Solution Summary

    This solution uses Microsoft Excel to derive at the value of an insurance policy.