Find the future value of the payment

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: $ 850

Second birthday: $850

Third birthday: $ 950

Fourth birthday: $ 850

Fifth birthday: $ 1,050

Sixth birthday: $ 950

 

After the child’s sixth birthday, no more payments are made. When the child reaches age 65, he or she receives $350,000. The relevant interest rate is 10 percent for the first six years and 7 percent for all subsequent years.

 

Find the future value of the payment at the child’s 65th birthday. (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16))

Solution: