(EAR). a. What is the present value of his contract? b. If instead of increasing annual payments Joe wants equal dollar amount month-end cheques, how large is his monthly pay (assuming the present value remains the same)?

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
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Use formulae and not excel Today is January 1, 2024. Your friend Joe has just
signed a contract to play for a baseball team. He will receive $900,000 for 2024,
$1,000,000 for 2025, $1,100,000 for 2026, and $1,200,000 for 2027. All
payments are made at the beginning of the year. Assume 8% annual interest rate
(EAR). a. What is the present value of his contract? b. If instead of increasing
annual payments Joe wants equal dollar amount month - end cheques, how large
is his monthly pay (assuming the present value remains the same)?
Transcribed Image Text:Use formulae and not excel Today is January 1, 2024. Your friend Joe has just signed a contract to play for a baseball team. He will receive $900,000 for 2024, $1,000,000 for 2025, $1,100,000 for 2026, and $1,200,000 for 2027. All payments are made at the beginning of the year. Assume 8% annual interest rate (EAR). a. What is the present value of his contract? b. If instead of increasing annual payments Joe wants equal dollar amount month - end cheques, how large is his monthly pay (assuming the present value remains the same)?
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