The cash flows look like this:
| Election | 1 | 2 … | 8 | 9 | … | 38 |
| 200,000 | 200,000 | 200,000 | 150,000 | … | 150,000 |
There are two annuities in this problem. The first is a straight annuity:
So the total value of the compensation is 1149327.79+912334.50=2061662.29
223.1
1. When Bill Clinton left office, he got a $150,000 per year pension for life. His salary while in office was approximately $200,000 per year. For this question, assume annual payments and an interest rate of 8%, compounded annually. Assume he stays in office for 8 years and he expects to live for 30 years after leaving office. What was the total value of his compensation at the beginning of his presidency, one year before his first paycheck?
The cash flows look like this:
Election 1 2 … 8 9 … 38 200,000 200,000 200,000 150,000 … 150,000 There are two annuities in this problem. The first is a straight annuity:
So the total value of the compensation is 1149327.79+912334.50=2061662.29