Aisha is considering turning pro before her senior year basketball season. It has always been her dream to join the WNBA. If she turns pro, Aisha expects a rookie contract worth $2 million. If she does not turn pro, there is a 10% chance an injury will prevent her from playing professionally and a 90% chance she will get a rookie contract worth $4 million in present value. What is the expected present value of Aisha's rookie contract if she stays in college for her senior year?

Question

Quizplus · Accepted Answer

The expected present value of Aisha's rookie contract if she stays in college for her senior year is calculated as follows: 90% chance of a $4 million contract = 0.9 * $4 million = $3.6 million. The 10% chance of not playing professionally due to injury results in $0, which does not affect the calculation since it's multiplied by 0. Therefore, the expected value is $3.6 million.

Aisha Is Considering Turning Pro Before Her Senior Year Basketball