A professional athlete has signed a contract worth $56 million over 5 years. Assume that value is the value of the contract today. (a) If the contract pays out at the end of each year and the interest rate is 6% nominal annual, compounded monthly, how much is it worth at the end of each year? (b) Draw a cash flow diagram of the payouts of the cash flow in part (a). (c) If the interest rate is 6% nominal annual compounded monthly and the athlete would like to defer the payouts over a span of 25 years, calculate the monthly income over 25 years.
A professional athlete has signed a contract worth $56 million over 5 years. Assume that value is the value of the contract today. (a) If the contract pays out at the end of each year and the interest rate is 6% nominal annual, compounded monthly, how much is it worth at the end of each year? (b) Draw a cash flow diagram of the payouts of the cash flow in part (a). (c) If the interest rate is 6% nominal annual compounded monthly and the athlete would like to defer the payouts over a span of 25 years, calculate the monthly income over 25 years.
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 professional athlete has signed a contract worth $56 million over 5 years. Assume that value is the value of the contract today.
(a) If the contract pays out at the end of each year and the interest rate is 6% nominal annual, compounded monthly, how much is it worth at the end of each year?
(b) Draw a cash flow diagram of the payouts of the cash flow in part (a).
(c) If the interest rate is 6% nominal annual compounded monthly and the athlete would like to defer the payouts over a span of 25 years, calculate the monthly income over 25 years.
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