Question

In: Finance

What is the monthly salary of Padmavati if she agrees to a 25 year contract whose...

What is the monthly salary of Padmavati if she agrees to a 25 year contract whose value today is $235,000. She gets a signing bonus equal to 15 percent of the contract value and agrees to an APR of 5.29 percent compounded monthly?

Multiple Choice

  • $1,201.72

  • $1,161.66

  • $1,196.44

  • $1,261.80

  • $1,215.62

Solutions

Expert Solution

Bonus amount = $235000*15% =$35250
Salary present value = $235000-35250
=$199750
Present Value Of An Annuity
= C*[1-(1+i)^-n]/i]
Where,
C= Cash Flow per period
i = interest rate per period =5.29%/12 = 0.4408333%
n=number of period =25*12 =300
199750= C[ 1-(1+0.004408333)^-300 /0.004408333]
199750= C[ 1-(1.004408333)^-300 /0.004408333]
199750= C[ (0.7328) ] /0.004408333
C = $1201.72
Correct Option : $1201.72

jeff jeffy answered 2 years ago
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