operation management

| December 7, 2015

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: $ 750
Second birthday: $ 750
Third birthday: $ 850
Fourth birthday: $ 850
Fifth birthday: $ 950
Sixth birthday: $ 950

After the child’s sixth birthday, no more payments are made. When the child reaches age 65, he or she receives $250,000. The relevant interest rate is 10 percent for the first six years and 7 percent for all subsequent years. Calculate the future value of the payment at the child’s 65th birthday. (Do not round intermediate

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