Deliverable Length: 3 Parts: See Assignment Details
The CEO has decided to plan for a salary action affecting a number of individuals in the organization. He has decided to give a $2,000 cost-of-living pay increase to all hourly employees and a $4,000 increase to all software analysts with salaries less than $55,000. However, he wants to do this in 2 years. He wants you to give him two options (you do not have to recommend an option).
Option 1: How much would he have to invest today in a single lump sum at a 6% annual interest rate compounded quarterly to have sufficient funds to execute his plan?
Option 2: How much would he have to invest in equal monthly payments at a 3% annual interest rate compounded monthly to have sufficient funds to execute his plan?
Because the CEO wants to increase salaries for all hourly employees and software analysts, there needs to be a count of the employees in each category.
Part 2: Use the funding you calculated in Part 1 and the appropriate compound interest formulas you learned in business algebra to calculate the investment amounts for options 1 and 2. Show your calculations in any empty area on the worksheet created in Part 1.
PV – Returns the present value of a future amount
PMT – Calculates the payment necessary to accumulate a future amount
Compound Interest Formulas:
A = P(1 + i)n
FV = PMT × (1 + i)n – 1
Part 3: Add at least 1 paragraph to the memo from Week 4 showing the comparison between the two investment options.
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