A Star Basketball Player Signs a Contract That Newspaper Reports

question 16

Multiple Choice

A star basketball player signs a contract that newspaper reports say is worth $20 million. The player receives $5 million on signing, and $5 million a year for three years. The contract is worth

• A) $20 million as reported in the papers.
• B) less than $20 million since the present value of $5 million received one or more years from now is less than $5 million.
• C) more than $20 million because the present value of $5 million received one or more years from now is more than $5 million.
• D) either more or less than $20 million, depending on the value of the discount rate.

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Definitions:

Senior Officers

High-ranking executives in a company or organization, typically responsible for major decisions and overall management.

Interested Parties

Individuals or groups who have a stake in or could be affected by a decision or action.

Proposed Rule

A potential regulation published by a government agency for public comment before it becomes finalized and enforceable.

Agency Policy

A principle or rule adopted by an organization or government entity to guide decisions and achieve rational outcomes.