Future Value and Multiple Cash Flows An insurance company is offering a new policy to its 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: | $ 500 |
| Second birthday: | $ 600 |
| Third birthday: | $ 700 |
| Fourth birthday: | $ 800 |
| Fifth birthday: | $ 900 |
| 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 $275,000. If the relevant interest rate is 11 percent for the first six years and 7 percent for all subsequent years, is the policy worth buying?
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