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A well-known insurance company offers a policy known as the "Estate Creator Six Pay". 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 makes payments of $730 on the child's 1'st, 2'nd and 3'rd birthdays, and then payments of $855 on each of the 4'th, 5'th and 6'th birthdays. No further payments are made after the child's sixth birthday. When the child reaches age 65, he or she receives $143,723. If the opportunity cost of capital is 6% for the first 6 years and 7% for all subsequent years, is the policy worth buying? If not, what payment should we demand from the insurance company when our child reaches age 65?

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  • Reference No.:- M947350

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