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21 June, 00:58

Assume you work for an employer who will contribute $60 a week for the next 20 years into a retirement plan for your benefit. At a discount rate of 9 percent, what is this employee benefit worth to you today?

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  1. 21 June, 01:33
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    Present Value = $28,935.66

    Explanation:

    Giving the following information:

    Assume you work for an employer who will contribute $60 a week for the next 20 years into a retirement plan for your benefit. The discount rate is 9 percent.

    First, we need to calculate the final value using the following formula:

    FV = {A*[ (1+i) ^n-1]}/i

    A = weekly deposit = 60

    n = 20*52 = 1,040

    i=0.09/52=0.00173

    FV = {60*[ (1.00173^1040) - 1]}/0.00173 = $174,638.85

    Now, we can calculate the present value:

    PV = FV / (1+i) ^n

    PV = 174,638.85 / (1.00173) ^1040 = $28,935.66
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