A person who would work for 35 more years earning $62,000 per year and discounts the future at an interest rate of 6.5% per year has an annually-compounded discounted expected present value of current and future earnings equal to

Question

Quizplus · Accepted Answer

We can use the formula for the present value of an annuity due to calculate the discounted expected present value of the person's earnings:

PV = C * [(1 - (1 + r)^(-n)) / r] * (1 + r)

where:
- PV is the present value
- C is the annual payment (salary)
- r is the interest rate
- n is the number of periods (years of work)

Plugging in the values, we get:

PV = 62,000 * [(1 - (1 + 0.065)^(-35)) / 0.065] * (1 + 0.065)
PV = $848,591.18

Therefore, the answer is C. The person's discounted expected present value of current and future earnings is $848,591.

A Person Who Would Work for 35 More Years Earning