is now December 31, 2008 (t = 0), and a jury just found in favor of a woman who
ID: 2678480 • Letter: I
Question
is now December 31, 2008 (t = 0), and a jury just found in favor of a woman who sued the city for injuries sustained in a January 2007 accident. She requested recovery of lost wages, plus $200,000 for pain and suffering, plus $40,000 for her legal expenses. Her doctor testified that she has been unable to work since the accident, and that she will not be able to work in the future. She is now 62, and the jury decided that she would have worked for another 3 years. She was scheduled to have earned $37,000 in 2007, and to simplify this problem, assume the entire annual salary amount would be received on December 31, 2007. Her employer testified that she would probably have received raises of 3% per year. The actual payment will be made on December 31, 2009. The judge stipulated that all dollar amounts are to be adjusted to a present value basis on December 31, 2009, using a 6% annual interest rate, using compound, not simple, interest. Furthermore, he stipulated that the pain and suffering and legal expenses should be based on a 12/31/08 date. How large a check must the city write on 12/31/09?Round your answer to the nearest cent.
Explanation / Answer
Wages 2007 37,000*(1.06)^2 2008 37,000*1.03 *1.06 2009 37,000*1.03 *1.03 Pain and suffering 200,000 *1.06 Legal 40,000*1.06 41,573.20 + 40,396.60 + 39,253.30 + 212,000+ 42,400 Total 375,623.10
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