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You’ve just joined the investment banking firm of Dewey, Cheatum, and Howe. They’ve offered you two...

You’ve just joined the investment banking firm of Dewey, Cheatum, and Howe. They’ve offered you two different salary arrangements. You can have $7,400 per month for the next two years, or you can have $6,100 per month for the next two years, along with a $33,000 signing bonus today. Assume the interest rate is 6 percent compounded monthly.

If you take the first option, $7,400 per month for two years, what is the present value?

What is the present value of the second option?

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Answer #1

In both cases, we use the PV formula in Excel.

Case I: PMT = 7400, Rate = 6%/12 = 0.5%, NPER = 24

Case I: PMT = 6100, Rate = 6%/12 = 0.5%, NPER = 24

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