Question: Many academic institutions offer a sabbatical policy. Every seventh year a professor is given a year free of teaching and other administrative responsibilities at full pay. For a professor earning $100,000 per year who works for a total of 42? years,
A) The equivalent discount rate is
B)what is the present value of the amount she will earn while on sabbatical if the interest rate is 10% (EAR)? Note: Assume that the sabbatical annual salary is paid in one lump sum every 7 years.