Interest rate of quarterback income
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A famous quarterback just signed a $17 million contract providing $4.25 million a year for 4 years. A less famous receiver signed a $16 million 3-year contract providing $4 million now and $4 million a year for 3 years. Who is better paid? The interest rate is 8 percent.
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Solution Summary
The solution determines which famous quarterback is paid better when the interest rate is 8 percent.
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The present value of four year contract = 4.25/(1+8%)^1 + 4.25/(1+8%)^2 + ...
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