Yogi Berra Jr. has agreed to play for the New York Mets for $4 million per year for the next 10 years. What table would you use to calculate the value of this contract in today's dollars?
A) Present value of a single amount
B) Future value of an annuity
C) Future value of a single amount
D) Present value of an annuity

Question

Quizplus · Accepted Answer

To calculate the value of this contract in today's dollars, you would use the "Present value of an annuity" table. This is because the contract involves a series of equal payments ($4 million per year) over a fixed period (10 years), which is the definition of an annuity. The present value calculation helps determine the current worth of those future payments.