Posted by **Gibbons** on Wednesday, June 23, 2010 at 3:39am.

Suppose an employee of a company is retiring and has the choice of two benefit options under the company pension plan. Option A consists of a guaranteed payment of $1,575 at the end of each month for 10 years. Alternatively, under option B the employee receives a lump-sum payment equal to the present value of the payments described undeq option A.

(a) find the sum of payments under option A.

(a) find the lump-sum payment under option B if it is determined by using an interest rate of 18% compounded monthly.

- math -
**Henry**, Wednesday, July 7, 2010 at 5:46pm
Option A=1575(120mo.)=189000.

Option B=189000(r+1)^n

r=(18/12)/100=0.015=MPR=monthly % rate

n=(10yr)(12)=120=number of compounding

periods.

Option B=189000(1.015)^120=1128000.

- math -
**Henry**, Wednesday, July 7, 2010 at 9:39pm
CORRECTION:

Option B = 1575(1.015)^120 = 9401.68

## Answer This Question

## Related Questions

- Mathematics - Suppose an employee of a company is retiring and has the choice of...
- PSY - 22. <22{7[1(04)]}> A company can either invest in employee training ...
- Math - Meg's pension plan is an annuity with a guaranteed return of 7% per year...
- calculus - Meg's pension plan is an annuity with a guaranteed return of 4% per ...
- accounting - Excel document (2-3 pages) Details: Incorporate an ESO plan into a ...
- math - Meg's pension plan is an annuity with a guaranteed return of 6% per year...
- math - Meg's pension plan is an annuity with a guaranteed return of 7% interest ...
- Human Resource - In 2003, a company employee received an option to purchase the ...
- Business math - Meg's pension plan is an annuity with a guaranteed return of 3% ...
- finance math - Meg's pension plan is an annuity with a guaranteed return of 7% ...

More Related Questions