10 May WHAT IS THE SIZE OF THE SETTLEMENT?
A plaintiff has been awarded the following: (1) The present value of 2 years back pay. The plaintiff’s annual salary for the last 2 years would have been $40 000 and $43 000 respectively. (2) The present value of 5 years’ future salary which is assumed to be $45 000 per year. (3) $100 000 for pain and suffering. (4) $20 000 for court costs. Assume salary payments are equal amounts paid at the end of each month and that the appropriate interest rate is a 9% EAR. What is the size of the settlement?
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