You are an elite sportsperson and are about to sign a contract with a rugby league...

You are an elite sportsperson and are about to sign a contract with a rugby league team reportedly, “worth $10 million over eight years”. The contract reveals you will receive $24,038.46 each week for eight years. A competing team is prepared to offer you $8.5 million cash today for an eight-year playing contract. If interest rates are 4% p.a. compounded weekly, which team’s offer should you accept?

Can you please provide full explanation.

Solutions

Expert Solution

Future Value
Offer 1: $11,742,202.62
Offer 2: $11,632,836.93

Since the Future Value of Offer 1 is more than the Future Value of Offer 2. Therefore, the player should take Offer 1 with a weekly payment of $24038.46 compounded weekly @ 4%p.a.

2nd Method

From 21 to 396 the weekly calculation has the same formula and hence not shown

jeff jeffy answered 1 year ago

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