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A rookie quarterback is in the process of negotiating his first contract. The team's general manager has offered him three possible contracts. Each of the
A rookie quarterback is in the process of negotiating his first contract. The team's general manager has offered him three possible contracts. Each of the contracts lasts for four years. All of the money is guaranteed and is paid at the end of each year. The terms of each of the contracts are listed below. Contract A Contract B Contract C $14 millions Year 1 $15 millions $12 millions Year 2 15 millions 14 millions 14 millions Year 3 15 millions 16 millions 14 millions Year 4 15 millions 18 millions 18 millions Assume that the quarterback can invest his money and earn 13% rate of return, which of the three contracts will offer him the most value at the end of year 4. (10 points)
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