During the 2000 Major League Baseball season, Bobby Bonilla was no longer playing for the New York Mets but was still owed his $5.9 million salary. The team was seeking to free up the money in order to sign more players in anticipation of making a run at the World Series, and Bonillas agent offered the team a deal where he would defer payment for 10 years, and then be paid an annuity for the next 25 years at an interest rate of 8%. That is every July 1st from 2011 to 2035, Bonilla would receive a check from the Mets that often exceeded the salaries of some of the teams best young players, a date now commemorated by bitter Mets fans as Bobby Bonilla Day.

(a) (2 points) Using the agreed upon interest rate of r = 0.08, compute Bonillas annual payoff. How much money will he receive overall? (b) (2 points) Unbeknownst to many at the time, the reason that the Mets were eager to make this deal was that their owner was heavily invested with Bernie Madoff, who was guaranteeing annual returns of 12% to 15%. Of course, this was revealed to be a Ponzi scheme in 2008, before Bonillas payments had even started. Using a low- end estimate of r = 0.12, calculate how much the team thought it was saving by making this deal. (c) (2 points) As a result of the global financial crisis of which the Madoff scandal wasonly a part, interest rates were historically low for nearly a decade afterwards. Using a more realistic discount rate of r = 0.04, calculate how much Bonilla gained as a result of this deal