Question

you have just joined the investment banking firm of dewey cheated and howe.They have offered you two different salary arrangements.you can have 8100$ per month for the next three years or you can have 6800$ per month for the next three years. along with a 36500$ signing bonus today.assume the interest rate is 8 percent compounded monthly.

if you take thef

Answer 1

Rate per month =8%/12
Number of Months =12*3 =36
PV of 1st Salary arrangement =PMT*((1-(1+r)^-n)/r) =8100*((1-(1+8%/12)^-36)/(8%/12)) =258485.62

PV of 2nd Salary arrangement =One time bonus+PMT*((1-(1+r)^-n)/r) =36500+6800*((1-(1+8%/12)^-36)/(8%/12)) =253500.28

First salary arrangement is better