Assignment

Time Value of Money

Joe's love to his beloved wife

When Marilyn Monroe died, ex$-$husband Joe DiMaggio vowed to place fresh flowers on

her grave every Sunday as long as he lived. A bunch of fresh flowers that the former

baseball player thought appropriate for the star cost about $$5$ when she died in $1962.$

Based on actuarial tables, "Joltin' Joe" could expect to live for $30$ years after the actress

died. Assume that the stated annual interest rate, compounded annually, is $10\mathrm{.}4$ percent.

Assuming that each year has exactly $52$ weeks, what is the present value of this

commitment?

Mr$.$ Ananta Jalil becomes a Investment Banker

Mr$.$ Ananta Jalil has received a job offer from a large investment bank as an assistant to

the vice president. His base salary will be $$35,000.$ He will receive his first annual salary

payment one year from the day he begins to work. In addition, he will get an immediate

$$10,000$ bonus for joining the company. His salary will grow at $4$ percent each year. Mr$.$

Jalil is expected to work for the next $5$ years. What is the present value of the offer if the

discount rate is $12$ percent?

$[$Hints: Mixed cash flow$]$