An employee has been offered a 5 year contract for a positio

An employee has been offered a 5 year contract for a position at a company.Assume, initalliy that the salary is paid only at end of year and the interest rate is 0.375% bimonthly

a) You estimated that your living expenses to be $3,400 per bimonthly pay period(two times a month). What minimum annual salary would you need to receive (assume you are paid bimonthly payments(two times a month)) to cover these expenses, assuming the interest rate stays the same?

Solution

Minimum annual salary ($) = Bi-monthly expenses x PVIFA(0.375%, 24**)

= 3,400 x 22.9107 (From PVIFA tool)

= 77,896.38

**Number of periods = 12 x 2 = 24