Decision-Making. An athlete attains free agency and is looking for a new team. The Bronco Crunchers offer a salary of $100,000t for 8 yr, and the Doppler Radars offer a salary of $83,000 t for 9 yr, where t is in years. a. Based on the accumulated present values of the salaries, which team has the better offer, assuming an interest rate of 4.2%, compounded continuously? b. What signing bonus should the team with the lower offer give to equalize the offers? The difference between the accumulated present values of the two offers, or $57,309.30
Decision-Making. An athlete attains free agency and is looking for a new team. The Bronco Crunchers offer a salary of $100,000t for 8 yr, and the Doppler Radars offer a salary of $83,000 t for 9 yr, where t is in years. a. Based on the accumulated present values of the salaries, which team has the better offer, assuming an interest rate of 4.2%, compounded continuously? b. What signing bonus should the team with the lower offer give to equalize the offers? The difference between the accumulated present values of the two offers, or $57,309.30
Solution Summary: The author calculates the accumulated present value of both the team, crunches and Radars, assuming an interest rate of 4.2%.
Decision-Making. An athlete attains free agency and is looking for a new team. The Bronco Crunchers offer a salary of $100,000t for 8 yr, and the Doppler Radars offer a salary of $83,000t for 9 yr, where t is in years.
a. Based on the accumulated present values of the salaries, which team has the better offer, assuming an interest rate of 4.2%, compounded continuously?
b. What signing bonus should the team with the lower offer give to equalize the offers?
The difference between the accumulated present values of the two offers, or $57,309.30
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