00:02
We have to calculate the value of the policy on the child's 65th birthday.
00:07
So we need to consider the payments made by the parent, the interest rates for different periods and the final payout at age 65.
00:15
So here are the details of the payments and interest rates.
00:18
Number one, payments made by the parent, first birthday, $770, second birthday, $770, third birthday, $870, fourth birthday, $870, fifth birthday, $970 and sixth birthday, $970.
01:23
Now, in second interest rates, so 11 % for the first six years, that is from birth to the sixth birthday and 7 % for all subsequent years, that is from the seventh birthday to the 65th birthday.
02:00
Now, let's calculate the future value of the payments made by the parent.
02:06
So first let's calculate the future value of the payments made during the first six years at 11 % interest.
02:14
So fv, that is future value is equal to $770 multiplied by 1 added to 0 .11 to the power of 5 added to $870 multiplied by 1 added to 0 .11 to the power of 4 added to $870 multiplied by 1 added to 0 .11 to the power of 3 added to $970 multiplied by 1 added to 0 .11 to the power of 2 added to $970 multiplied by 1 added to 0 .11 to the power of 1 which is equal to $6 ,727 .84 added to $5 ,513 .08 added to $4 ,462 .33 added to $3 ,570 .30 added to $2 ,802 .90 added to $2 ,231 .30.
03:37
Evaluating it we get $25 ,308 .75...