1. A sport organization has a commitment from a sponsor for a $17,000 payment in 3 years. What is the present value of that payment at an interest rate of 3%?
2. This morning I invested my $3,000 tax refund. If I don't touch this investment until I retire in 30 years, how much money will I have accumulated at an interest rate of 5%?
3. A professional athlete is owed a bonus payment of $2 million due today. The team he plays for is currently low on cash and offers the player a deferred payment of $2.5 million five years from now instead of the payment due today. Which should the player take - the money due today or the deferred payment? Assume an interest rate of 4%. Show your work. Hint: you can technically make your case using present value OR future value, but be sure to use the "correct" numbers depending on which formula you choose.
4. 1.What is the present value of a deferred signing bonus of $4,000,000 that will be paid at the end of one year, assuming an annual rate of return of 5.5%?