U.S. military had to cut back on its force (after cold war and before September 11, 2001) The government offered more than 65,000 individuals who were about to be let go a choice between a one time lump sum or a series of monthly payments. The terms depended upon rank, but one typical example was $22,283 up front or 309 dollars a month (note this is different than the problem in the lecture) for 18 years. The monthly payments were given out at the end of the month. There was no risk of default as they were getting paid directly by the U.S. Government.

The present value of the first option was obviously $22,283. What was the present value of the annuity? (assume that interest rates were 5 percent APR but compounded monthly) Show your work.