Question
Lebron James has just signed a new contract with the Cleveland Cavaliers. The contract will pay him $20 million every year for four years with
Lebron James has just signed a new contract with the Cleveland Cavaliers. The contract will pay him $20 million every year for four years with the first payment at t=1 and the last payment at t=4. The annual interest rate is 4%. Which one of the following statements is true about the value of Lebrons contract with Cleveland? a) The present value at t=0 is $80 million and the future value at t=4 is $80 million (approximately). b) The present value at t=0 is $72.6 million and the future value at t=4 is $80 million (approximately). c) The present value at t=0 is $80 million and the future value at t=4 is $84.9 million (approximately). d) The present value at t=0 is $72.6 million and the future value at t=4 is $84.9 million (approximately). e) None of the above.
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