You’ve just joined the investment banking firm of Dewey, Cheatum, and Howe. They’ve offered you two different salary arrangements. You can have $8,700 per month for the next three years, or you can have $7,400 per month for the next three years, along with a $39,500 signing bonus today. Assume the interest rate is 5 percent compounded monthly.
If you take the first option, $8,700 per month for three years, what is the present value? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
Present value $
What is the present value of the second option? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
Present value $
Suppose you just bought an annuity with 11 annual payments of $16,400 at the current interest rate of 13.5 percent per year.
What is the value of the investment at the current interest rate of 13.5 percent? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
Value of investment $
What happens to the value of your investment if interest rates suddenly drop to 8.5 percent? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
Value of investment $
What happens to the value of your investment if interest rates suddenly rise to 18.5 percent? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
Value of investment $