00:01
In this problem, you have just joined the investment banking firm of dewey chitam and home.
00:09
They have offered you two different salary arrangements.
00:14
You can have $85 ,000 per month for next two years, right? so please, this is a mark here.
00:26
So 85 ,000 per month for two next year, right, next two years, right? so please edit that.
00:35
So now or you can have $74 ,000 per year for the next two years, right, along with the 30 ,000 signing bonus today.
00:48
Right.
00:48
So the bonus is paid immediately and the salary is paid equal amounts at the end of the each month.
00:55
Right.
00:55
If the interest is 9 % compounded monthly, what is the value of today of each option? okay.
01:11
So now you can have a first scenario is this is assuming option 1.
01:17
So you can have $85 ,000 per month for next two years, right? assuming rate of interest is 9 % compounded monthly.
01:28
Right so now amount is $85 ,000 right and i is what 9 % right monthly rate is what 9 by 12 because it is compounded monthly so it should be 0 .75 which should be equal to 0 .0075 right so present value for an ordinary annuity is given by c into this is the formula you have to remember see into a hole in brackets it will be 1 minus in brackets it will be 1 plus i to the power minus n right divided by i right so now so when we solve this we will be getting here the value as let us see what it comes off to be one point there should be 1 .0075 to the power minus 24, right? this is subtracted with 1 and this is divided with 0 .0075, which is multiplied with 8 ,500, 8 ,000, right? it was $4 ,000, $85 ,000.
03:06
Dollars which should be equals to 1860 577 .422 right so this is in dollars right so this is for the answer for the present value of the full first option right now moving forward for the second option you can have 74 000 per month for next two years along with the 30 000 dollar signing bonus total receipt will be equals to what this will be equal to present value of 74 ,000 dollars per month plus dollar 30 ,000 signing bonus, right? okay, so now we need to put the same things here.
04:09
So how, what we will get here? let us see...