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

15. You've just joined the investment banking firm of Dewey, Cheatum, and Howe. They've offered you two different salary arrangements. You can have $80,000 per year for the next two years, or you can have $60,000 per year for the next two years, along with a $30,000 signing bonus today. The bonus is paid immediately, and the salary is paid in equal amounts at the end of each month. If the interest rate is 12 percent compounded monthly, which do you prefer?

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Answer #1

Option 1 is better, it is better to receive 80,000 per year as it has a higher present value.

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