Application of Time Value of Money Skills

Harry Hurler has been playing baseball since he was five years old and has always dreamed of playing in the big leagues. Last season, he was a starting pitcher for a double$-$A $($AA$)-$level baseball team, the Roswell Extraterrestrials; last year, he was the first runner$-$up for the Minor League Player of the Year award. Using, his $97mph$ fastball, an impeccable curve ball and slider, and a reliable changeup pitch, he achieved a $17-3$ win$-$loss record, an earned run average $($ERA$)$ of $2\mathrm{.}84,$ and $108$ strikeouts in $123\mathrm{.}1$ innings pitched. He is also your best friend.

Two weeks ago, on his three$-$year anniversary with the team, Harry received the following email from his agent, Steven Sign'em$-$Now, indicating that he is being called up to the Springfield Dusties, the Extraterrestrials's corresponding Major League Baseball $($MLB$)$ team. Moreover, Harry's contract is being revised to reflect his new status. The email describes the general terms and conditions of Harry's revised contract.

after six months of participation with an MLB team. This bonus will be paid immediately on completion of the six$-$month period.

The Player is offered a performance$-$based bonus, as well as a milestone bonus. Both are intended to encourage outstanding performance.

The Player is offered the following award$-$based performance incentive: a $15\%$ bonus if he is selected for consideration of a major award$-$such as the

Cy Young Award $($for outstanding pitching$).$ The Player is also offered the followind milestone bonus: a $$250,000$ bonus if he ties Nolan Ryan's $1973$ single$-$season strikeout record $(383$ strikeouts$).$

The Player is eligible for each potential bonus each year that the contract is

$1$ Assumptions and

Calculated Values

$2$ Bank Rate Information:

$3$ Harry's Bank Account Rate $($compounded monthly$)$

$\backslash$table$[[4,$Monthly Bank Rate,$4\mathrm{.}0000\%$