Suppose That Stephen Curry, a Basketball Player for the Golden

question 32

Multiple Choice

Suppose that Stephen Curry, a basketball player for the Golden State Warriors, will become a free agent at the end of this NBA season. Suppose that Curry is considering two possible contracts from different teams. Note that the salaries are paid at the end of EACH year.
The interest rate is 10%. Based on this information, which of the following is true?

• A) Curry should take the Boston contract because it has a higher present value.
• B) Curry should take the Portland contract because it has a higher present value.
• C) Curry is indifferent between the two contracts because they are both worth $12 million.
• D) Curry is indifferent between the two contracts because they are both worth $10.9 million.

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Definitions:

Risk

The possibility of loss or another adverse outcome resulting from a particular action or event.

Negatively Skewed Distribution

A probability distribution that is skewed to the left, indicating that the tail on the left side of the probability density function is longer or fatter than the right side.

Negative Correlation Coefficient

A statistical measure indicating that as one variable increases, the other variable tends to decrease.

Linear Relationship

A type of connection between two variables where the change in one is directly proportional to the change in the other.