You've just joined the investment banking firm of Dewey, Cheatum, and Howe. They've offered you two different salary arrangements: Arrangement 1: you can have $75,000 per year for the next two years, or Arrangement 2: you can have $64, 000 per year for the next two years, along with a $20,000 signing bonus today. The bonus is paid immediately, and the salary is paid in equal amounts at the end of each month. The interest rate is 10 percent compounded monthly. a) What is the present value of Arrangement 1 ? b) What is the present value of Arrangement 2? c) Which arrangement do you prefer

You've just joined the investment banking firm of Dewey, Cheatum, and Howe. They've offered you two different salary arrangements: Arrangement 1: you can have $75,000 per year for the next two years, or Arrangement 2: you can have $64, 000 per year for the next two years, along with a $20,000 signing bonus today. The bonus is paid immediately, and the salary is paid in equal amounts at the end of each month. The interest rate is 10 percent compounded monthly. a) What is the present value of Arrangement 1 ? b) What is the present value of Arrangement 2? c) Which arrangement do you prefer

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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