The Atlanta Braves signed B.J Upton to a five-year contract. The contract calls for the following cash flows:
a signing bonus of $2.00 million today,
$12.08 million in year 1,
$13.24 million in year 2,
$14.02 million in year 3,
$15.04 million in year 4, and
$16.26 million in year 5.
If Upton has a discount rate of 6.00% per year, what is the value of his contract today (in millions)? (Express answer in millions. $1,000,000 would be 1.00)
An apartment is offering an opportunity for renters to pay a year’s worth of rent in advance. Currently, rent is $884.00 per month, and is due at the first of every month. (ANNUITY DUE). The complex has offered renters the opportunity to pay $9,328.00 in advance if they pay TODAY.
What monthly interest rate would make the renter indifferent between the two options?