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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.

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