You’ve just joined the investment banking firm of Dewey,


Question Description:

25

You’ve just joined the investment banking firm of Dewey, Cheatum, and Howe. They’ve offered you two different salary arrangements. You can have $6,800 per month for the next two years, or you can have $5,500 per month for the next two years, along with a $30,000 signing bonus today. Assume the interest rate is 7 percent compounded monthly. If you take the first option, $6,800 per month for two years, what is the present value? What is the present value of the second option?

Answer

25