When Marilyn Monroe died, her ex-husband Joe DiMaggio promised to place fresh flowers on her grave every Sunday for as long as she lived. The week after her death in 1962, a bouquet of fresh flowers that the former baseball player deemed appropriate for the star cost about $4. According to actuarial tables, "Joltin' Joe" could expect to live 39 years after the actress's death. Assume the EAR is 10.9 percent. Further, he assumes that the price of flowers will increase by 4.2 percent per year, when expressed as EAR. Assuming that each year has exactly 52 weeks, what is the present value of this commitment?

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To calculate the present value of Joe DiMaggios commitment we need to find the present value of ... View the full answer