Assume a large health system has just approved a $355,000 annual (per year) bonus to retain
its top cardiac surgeon. Assume that $355,000 will be paid to the surgeon as a bonus at the
end of each year that he stays, up to ten years. The healthcare system wants to invest a lump
sum now in order to have enough money to cover the bonuses over the ten-year period.
Assume the healthcare system can earn a 5 percent stated annual rate of return on its
investment, compounded semiannually (twice a year). What amount would the healthcare
system need to invest now in order to have enough money to pay the annual bonus to the
surgeon at the end of each of the next ten years?