payments are received tor $4$ Years.

What is the present value of the Pro Bowl clause

adjusted for its probability? $($Hint: multiply each annual

payment by the probability Luke will play.$)$

Correct! The solution is to treat it like a $4$ year annuity

and discount the total by the probability that Luke will

play.

$$156,815**3\mathrm{.}170**0\mathrm{.}25$

$=$$$124,276$

What is the total value of Contract offer #$3?$

Enter a response then click Submit below

$

Offer $1$

$$906,815$ immediate signing bonus

$$850,000$ at the end of each year for the next $5$ years

Offer $2$

$$203,408$ immediate signing bonus

$$100,000$ at the end of Years $1$ through $4$

$$150,000$ at the end of Years $5$ through $10$

$$1,000,000$ and the end of Years $11$ through $40$

Offer $3$

$$1,001,363$ immediate signing bonus

$$500,000$ at the end of Year $1$

$$1,000,000$ at the end of Year $2$

$$1,500,000$ at the end of Year $3$

$$2,500,000$ at the end of Year $4$

$$156,815$ bonus for any year Luke is selected to play in the Pro Bowl All Star game $(25\%$ probability in each year$)$

Canadian Football League

$$1,106,815$ immediate signing bonus

$$2,000,000$ at the end of Years $1$ through $3$

Only signing bonus is guaranteed $(80\%$ probability of being on team each year$)$