It is now December 31, 2011 (n=0), and a judge just found infavor of a woman who sued the
It is now December 31, 2011 (n=0), and a judge just found infavor of a woman who sued the city council for injuries sustainedin a January 2010 accident. She requested recovery of lost wagesplus $100,000 for pain and suffering $20,000 for legal expenses.Her doctor testified that she has been unable to work since theaccident and that she will not be able to work in the future. Sheis now 62, and the judge decided that she would have work foranother 3 years. She was scheduled to have earned $34,000 in 2010.(Assume that the entire annual salary amount would have beenreceived on December 31, 2010). Her employer testified that shewould probably received raises 5 percent per year. The actualpayment will be made on December 31, 2012. The judge stipulatedthat all dollar amounts are to be adjusted to a present value basison December 31, 2012, using a 7% annual interest rate and usingcompound, not simple interest. Furthermore, he stipulated that thepain and suffering and legal expenses should be based on December31, 2011, date. How large a check must the city write on December31, 2012?