Present Value of Retirement Benefits The first president and founder of Atwood Airlines retired three years ago and the company is paying her an annual retirement ben- efit of $60,000. The airline recently sold farmland adjacent to its landing strip and wishes to deposit enough money with a local bank to provide for the founder’s retirement benefits of

$60,000 per year for the next fifteen years. Payments are made at the end of the year.

a. If a minimum annual earnings rate of 4 percent is guaranteed by the bank, how much must be deposited currently to provide for the payments?

b. How much money must be deposited currently if the assumed earnings rate is 8 percent?