Engineering Economy 7th Edition by Leland Blank ,Anthony Tarquin

Exercise 2

A sports mortgage is the brainchild of Stadium Capital Financing Group, a company headquartered in Chicago, Illinois. It is an innovative way to finance cash-strapped sports programs by allowing fans to sign up to pay a "mortgag " over a certain number of years for the right to buy good seats at football games for several decades with season ticket prices locked in at current prices. In California, the locked-in price period is 50 years. Assume UCLA fan X purchases a $130,000 mortgage and pays for it now to get season tickets for $290 each for 50 years, while fan Y buys season tickets at $290 in year 1, with prices increasing by $20 per year for 50 years.
a) Which fan made the better deal if the interest rate is 8% per year b) What should fan X be willing to pay up front for the mortgage to make the two plans exactly equivalent economically (Assume he has no reason to give extra money to UCLA at this point.)