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Mary has been working at the university for 25 years, with an excellent record of service. As a result, the for 20 years, starting one year from her retirement date and each year for 19 years after that date. Mary would prefer a one-time payment the day after she retires. What would this amount be if the appropriate interest rate board wants to reward her with a bonus to her retirement package. They are offering her $75,000 a year is 7%? How do you calculate this and  the next step is

Mary’s replacement is unexpectedly hired away by another school, and Mary is asked to stay in her position for another three years. The board assumes the bonus should stay the same, but Mary knows the present value of her bonus will change. What would be the present value of her deferred annuity? How do I discount her bonus for three years back?

 
 May 29, 2015

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