You've just joined the investment banking firm of Dewey, Cheatum, and Howe. They've offered you two different salary arrangements. You can have $145,000 per year for the next two years, or you can have $55,000 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 at the end of each year.
Required: (a) If the interest rate is 9 percent compounded monthly, what is the present value of the first arrangement?
(b) If the interest rate is 9 percent compounded monthly, what is the present value of the second arrangement?
| ans a) | ||||
| We have to use financial calcualtor to solve this | ||||
| put In calculator | ||||
| FV | 0 | |||
| PMT | -145,000 | |||
| I | 9.381% | |||
| N | 2 | |||
| Compute PV | $253,760.09 | |||
| answer = | $253,760.09 | |||
| ans b) | ||||
| We have to use financial calcualtor to solve this | ||||
| put In calculator | ||||
| FV | 0 | |||
| PMT | -55,000 | |||
| I | 9%/12 | 9.381% | ||
| N | 12*2 | 2 | ||
| Compute PV | $96,253.83 | |||
| Total PV = | $126,253.83 | |||
| 96253.83+30000 | ||||
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