Assume a large healthcare system has just approved a $355,000 annual (per year) bonus to retain its top cardiac surgeon. Assume that $355,000 will be paid to the surgeon as a bonus at the end of each year that he stays, up to 10 years. The healthcare system wants to invest a lump sum now in order to have enough money to cover the bonuses over the 10-year period. Assume the healthcare system can earn a 5% stated annual rate of return on its investment, compounded semi-annually (twice per year).
What amount would the healthcare system need to invest now in order to have enough money to pay the annual bonus to the surgeon at the end of each of the next ten years?