Ruben worked in a union motorcycle factory for 20 years before returning to school to become a paramedic instead. He is 45 now.
He has a pension from his previous employer, which would pay him $1500/month after his retirement at 65. Assuming he will live to 80 (which is slightly higher than the life expectancy for an American man) he would earn $270000 over 15 years. The company has stopped offering pensions and wants to buy out his pension today. Should Ruben accept a buyout offer of $125,000? Assume that he could invest the money at an interest rate of 3% with a monthly compounding.
