Babe Ruth Jr. has agreed to play for the Cleveland Indians for $3 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 an annuity
B)Present value of a single amount
C)Future value of an annuity
D)None of these options

Question

Quizplus · Accepted Answer

The present value of an annuity table would be the best choice to calculate the value of this contract in today's dollars as it involves a periodic payment (annual) for a specified number of years (10). The present value of an annuity table helps to determine the current value of a series of equal payments made in the future by discounting them back to the present at a specified interest rate.