you have just joined the investment banking firm of dewey cheated and howe.They have offered you...

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

Expert Solution

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

jeff jeffy answered 2 years ago

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