Question

A rookie quarterback is negotiating his first NFL contract. His opportunity cost is 10%. He has been offered three possible 4-year contracts. Payments are guaranteed, and they would be made at the end of each year. Terms of each contract are as follows:

1

2

3

4

Contract 1	$3,000,000	$3,000,000	$3,000,000	$3,000,000
Contract 2	$2,000,000	$3,000,000	$4,000,000	$5,000,000
Contract 3	$6,500,000	$1,000,000	$1,000,000	$1,000,000

As his adviser, which contract would you recommend that he accept?

Select the correct answer.

a. Contract 1 gives the quarterback the highest future value; therefore, he should accept Contract 1.

b. Contract 2 gives the quarterback the highest present value; therefore, he should accept Contract 2.

c. Contract 3 gives the quarterback the highest future value; therefore, he should accept Contract 3.

d. Contract 1 gives the quarterback the highest present value; therefore, he should accept Contract 1.

e. Contract 3 gives the quarterback the highest present value; therefore, he should accept Contract 3.

You have saved $5,000 for a down payment on a new car. The largest monthly payment you can afford is $450. The loan will have a 6% APR based on end-of-month payments. What is the most expensive car you can afford if you finance it for 48 months? For 60 months? Do not round intermediate calculations. Round your answers to the nearest cent. Financed for 48 months: $   Financed for 60 months: $

Answer 1