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  3. 2. an employee's compensation includes an annuity

2. An employee's compensation includes an annuity with 9 annual payments that pays $95,000 at...

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2. An employee's compensation includes an annuity with 9 annual payments that pays $95,000 at retirement, with each subsequent payment growing by 5%. The firm's policy is to pre-fund such annuities one year before retirement. At an interest rate of 7%, how much would the firm need to invest? Equivalent problem structure (in neutral time-value-of-money terms): What is the present value of a series of payments received each year for 9 years, starting with $95,000 paid one year from now and the payment growing in each subsequent year by 5% ? Assume a discount rate of 7%

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