Question

After completing a long and successful career as senior vice president for a large bank, you...

After completing a long and successful career as senior vice president for a large bank, you are preparing for retirement. After visiting the human resources office, you have found that you have several retirement options to choose from:

  1. An immediate cash payment of $1.19 million.
  2. Payment of $52,000 per year for life.
  3. Payment of $42,000 per year for 4 years and then $62,000 per year for life (this option is intended to give you some protection against inflation).


You believe you can earn 7 percent on your investments and your remaining life expectancy is 8 years.

Required:
1. Calculate the present value of each option. (Future Value of $1, Present Value of $1, Future Value Annuity of $1, Present Value Annuity of $1.) (Use appropriate factor(s) from the tables provided. Do not round intermediate calculations. Enter your answers in whole dollars, not in millions. Round the final answer to nearest whole dollar.)

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