[Related to Solved Problem 3.1B] In 2015, the Washington Nationals baseball team signed pitcher Max Scherzer to a contract to play for them for seven years. He would be paid $15 million dollars per year for 14 years an additional 7 years beyond the end of the time he would be committed to play for the Nationals. The contract was widely reported as being worth $210 million (or $15 million per year x 14 years). One baseball writer argued, though, that "this deal serves as a nice reminder that the payment terms of a deal can have an impact on the actual value of the contract." Source: Dave Cameron, "Max Scherzer and When $210 Million Isn't $210 Million," fangraphs.com, January 19, 2015. Which of the following statements best represents the actual value of the contract? A. The actual value of the contract is $30 million for each year he plays. B. Scherzer's contract is worth $210 million on the day he signs it. The actual value of the contract is more than $30 million for each year he plays. D. The actual value of the contract is less than $30 million for each year he plays. Assume for simplicity that Scherzer receives his $15 million per year salaries for 2018, 2019, and 2020 at the end of each calendar year. The interest rate for this period of time is 7%. The present value of the salaries he will receive for these three years on January 1, 2018 is approximately
[Related to Solved Problem 3.1B] In 2015, the Washington Nationals baseball team signed pitcher Max Scherzer to a contract to play for them for seven years. He would be paid $15 million dollars per year for 14 years an additional 7 years beyond the end of the time he would be committed to play for the Nationals. The contract was widely reported as being worth $210 million (or $15 million per year x 14 years). One baseball writer argued, though, that "this deal serves as a nice reminder that the payment terms of a deal can have an impact on the actual value of the contract." Source: Dave Cameron, "Max Scherzer and When $210 Million Isn't $210 Million," fangraphs.com, January 19, 2015. Which of the following statements best represents the actual value of the contract? A. The actual value of the contract is $30 million for each year he plays. B. Scherzer's contract is worth $210 million on the day he signs it. The actual value of the contract is more than $30 million for each year he plays. D. The actual value of the contract is less than $30 million for each year he plays. Assume for simplicity that Scherzer receives his $15 million per year salaries for 2018, 2019, and 2020 at the end of each calendar year. The interest rate for this period of time is 7%. The present value of the salaries he will receive for these three years on January 1, 2018 is approximately
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
Related questions
Question
![[Related to Solved Problem 3.1B] In 2015, the Washington Nationals baseball team signed pitcher Max Scherzer to a contract to play for
them for seven years. He would be paid $15 million dollars per year for 14 years-an additional 7 years beyond the end of the time he
would be committed to play for the Nationals. The contract was widely reported as being worth $210 million (or $15 million per year x 14
years). One baseball writer argued, though, that "this deal serves as a nice reminder that the payment terms of a deal can have an impact
on the actual value of the contract."
Source: Dave Cameron, "Max Scherzer and When $210 Million Isn't $210 Million," fangraphs.com, January 19, 2015.
Which of the following statements best represents the actual value of the contract?
O A. The actual value of the contract is $30 million for each year he plays.
B. Scherzer's contract is worth $210 million on the day he signs it.
C. The actual value of the contract is more than $30 million for each year he plays.
D. The actual value of the contract is less than $30 million for each year he plays.
Assume for simplicity that Scherzer receives his $15 million per year salaries for 2018, 2019, and 2020 at the end of each calendar year.
The interest rate for this period of time is 7%. The present value of the salaries he will receive for these three years on January 1, 2018 is
approximately](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fb21ba033-5d68-4abc-9629-d398ef7e99b8%2Fa3722e05-5c26-4605-ac52-7e6065978510%2Fi0j15u_processed.png&w=3840&q=75)
Transcribed Image Text:[Related to Solved Problem 3.1B] In 2015, the Washington Nationals baseball team signed pitcher Max Scherzer to a contract to play for
them for seven years. He would be paid $15 million dollars per year for 14 years-an additional 7 years beyond the end of the time he
would be committed to play for the Nationals. The contract was widely reported as being worth $210 million (or $15 million per year x 14
years). One baseball writer argued, though, that "this deal serves as a nice reminder that the payment terms of a deal can have an impact
on the actual value of the contract."
Source: Dave Cameron, "Max Scherzer and When $210 Million Isn't $210 Million," fangraphs.com, January 19, 2015.
Which of the following statements best represents the actual value of the contract?
O A. The actual value of the contract is $30 million for each year he plays.
B. Scherzer's contract is worth $210 million on the day he signs it.
C. The actual value of the contract is more than $30 million for each year he plays.
D. The actual value of the contract is less than $30 million for each year he plays.
Assume for simplicity that Scherzer receives his $15 million per year salaries for 2018, 2019, and 2020 at the end of each calendar year.
The interest rate for this period of time is 7%. The present value of the salaries he will receive for these three years on January 1, 2018 is
approximately
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