Matt, a Star Basketball Player, Is Looking to Join a New

question 16

Multiple Choice

Matt, a star basketball player, is looking to join a new NBA team.The Bulls are offering him $24 million for one year.The Heat is offering him $10 million this year and $7.0 million in each of the next two years.The market interest rate is 5 percent.What is the present value of the offer from The Heat in millions (rounded to the nearest one hundred thousand dollars) ?

• A)$22.5 million
• B)$23.0 million
• C)$24.0 million
• D)$25.2 million

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Definitions:

Investment

The process of distributing funds with the aim of earning an income or profit.

Classical Economics

Classical economics is a school of thought in economics that emphasizes the importance of free markets, the role of competition, and the idea that economies are self-regulating systems governed by natural laws of production and exchange.

Real GDP

Gross Domestic Product adjusted for inflation, providing a more accurate reflection of an economy's size and how it's growing over time.

Equilibrium

A scenario where market demand equals supply, resulting in the stabilization of prices.