You are trying to save for a $150,000 Ferrari. You have $35,000 today that can be invested in the bank. The bank pays 8.1% annual interest on its accounts. How long will it be before you have enough to buy the car?
Imprudential, Inc. has an unfunded pension liability of $675 million that must be paid in 25 years. To assess the value of the firm's stock, financial analysts want to discount this liability back to the present. If the relevant discount rate is 6 percent, what is the present value of this liability?