The Springfield Crusaders just signed their quarterback to a 10 year $50 million contract.Is this contract really worth $50 million? (assume r 0)

Question

The Springfield Crusaders just signed their quarterback to a 10 year $50 million contract.Is this contract really worth $50 million? (assume r >0)

Quizplus · Accepted Answer

The contract is only worth $50 million if it were all paid out today. However, since the payments will be spread out over 10 years, there will be time-value-of-money considerations, such as inflation and interest rates, that will affect the true present value of the contract. Additionally, the player's performance over the 10 years and changes in the market for quarterbacks could also affect the actual value of the contract.

The Springfield Crusaders Just Signed Their Quarterback to a 10