A local newspaper headline blared, “Bo SmithSigned for $30 Million.” A reading of the articlerevealed that on April 1, 2014, Bo Smith, the formerrecord-breaking running back from Football University,signed a $30 million package with the Dallas Rangers.The terms of the contract were $3 million immediately,$2.4 million per year for the first five years (with thefirst payment after one year) and $3 million per yearfor the next five years (with the first payment at year6). If Bo’s interest rate is 8% per year, what would hiscontract be worth at the time he signs it?
A local newspaper headline blared, “Bo SmithSigned for $30 Million.” A reading of the articlerevealed that on April 1, 2014, Bo Smith, the formerrecord-breaking running back from Football University,signed a $30 million package with the Dallas Rangers.The terms of the contract were $3 million immediately,$2.4 million per year for the first five years (with thefirst payment after one year) and $3 million per yearfor the next five years (with the first payment at year6). If Bo’s interest rate is 8% per year, what would hiscontract be worth at the time he signs it?
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Question
A local newspaper headline blared, “Bo Smith
Signed for $30 Million.” A reading of the article
revealed that on April 1, 2014, Bo Smith, the former
record-breaking running back from Football University,
signed a $30 million package with the Dallas Rangers.
The terms of the contract were $3 million immediately,
$2.4 million per year for the first five years (with the
first payment after one year) and $3 million per year
for the next five years (with the first payment at year
6). If Bo’s interest rate is 8% per year, what would his
contract be worth at the time he signs it?
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