00:01
So we have our present value from the amount that the payments would be for the two plans.
00:05
And we know option one is that you'll be paid one twelfth of the $85 ,000 each month for two years and four, so for 24 months.
00:17
And you'll be getting that 9 % interest, but you'll get it compounded monthly.
00:21
So this is what the interest rate is per month.
00:23
So let's calculate how much you'll cumulatively have with the first.
00:27
So for option one, we'll call that present value of one.
00:33
And so we're going to take that payment of that 7 ,08333 times 1 minus, and we're going to take that 1 .0075 to the negative 24th power, and then we're going to divide that by that rate, which is 0 .0075.
00:58
So taking that 7 ,083 .33 times 1 minus 1 .0075 to the power of negative 24.
01:13
And close that parenthesis divided by 0 .0075 tells us that that would be worth in two years, $155 ,048 and basically $0 .0075.
01:29
Now let's do the same for the other, but there is a bonus.
01:33
So the present value for two is going to be just substituting in place of this, this in place of here, that $6 ,166 .67 times the same thing, 1 minus 1 .0075 to the negative 24th power over 0 .0075.
02:00
And just do a little second entry and change that one value...