Anna Waldheim was seriously injured in an industrial accident. She sued the responsible parties and...
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Anna Waldheim was seriously injured in an industrial accident. She sued the responsible parties and was awarded a judgment of $1,500,000. Today, she and her attorney are attending a settlement conference with the defendants. The defendants have made an initial offer of $100,684 per year for 28 years. Anna plans to counteroffer at $161,177 per year for 28 years. Both the offer and the counteroffer have a present value of $1,500,000,
the amount of the judgment. Both assume payments at the end of each year.
a.What interest rate assumption have the defendants used in their offer (rounded to the nearest wholepercent)?
b.What interest rate assumption have Anna and her lawyer used in their counteroffer (rounded to the nearest whole percent)?
c.Anna is willing to settle for an annuity that carries an interest rate assumption of 7%.
What annual payment would be acceptable to her?
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