A baseball player is offered a 3-year contract which pays him the following amounts at the end of each year: Year 1: $6 million Year 2: $8 million Year 3: $10 million Instead of accepting the contract, the player asks for a contract that has the team paying the same total amount, but payments are equal ($8 million a year) and come at the beginning of each year for the 3 years (3 total payments). Assuming that the appropriate discount rate is 8% per year, what is the difference in the present value of two offers?
A baseball player is offered a 3-year contract which pays him the following amounts at the end of each year: Year 1: $6 million Year 2: $8 million Year 3: $10 million Instead of accepting the contract, the player asks for a contract that has the team paying the same total amount, but payments are equal ($8 million a year) and come at the beginning of each year for the 3 years (3 total payments). Assuming that the appropriate discount rate is 8% per year, what is the difference in the present value of two offers?
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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A baseball player is offered a 3-year contract which pays him the following amounts at the end of each year:
Year 1: $6 million
Year 2: $8 million
Year 3: $10 million
Instead of accepting the contract, the player asks for a contract that has the team paying the same total amount, but payments are equal ($8 million a year) and come at the beginning of each year for the 3 years (3 total payments). Assuming that the appropriate discount rate is 8% per year, what is the difference in the present value of two offers?
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