Suppose That Ray Allen, a Basketball Player for the Seattle

question 1

Multiple Choice

Suppose that Ray Allen, a basketball player for the Seattle Supersonics, will become a free agent at the end of this NBA season.Suppose that Allen is considering two possible contracts from different teams.Note that the salaries are paid at the end of EACH year. $\begin{array}{lll} & \text { Contract \#1 (Seattle) } & \text { Contract \#2 (Portland) } \\\text { Signing bonus (paid today) } & \$ 1 \text { million } & \$ 1 \text { million } \\\text { First-year salary } & \$ 2 \text { million } & \$ 4 \text { million } \\\text { Second-year salary } & \$ 4 \text { million } & \$ 4 \text { million } \\\text { Third-year salary } & \$ 5 \text { million } & \$ 3 \text { million }\end{array}$ The interest rate is 10%.Based on this information, which of the following is true?

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

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Definitions:

Limited Government

A principle of governance where governmental power is restricted by laws or a constitution to protect individual freedoms.

Electoral Votes

Votes cast by members of the electoral college, who are selected by voters in each U.S. state, that determine the outcome of presidential elections.

John Quincy Adams

John Quincy Adams was the sixth President of the United States (1825–1829), known for his diplomatic contributions before his presidency and his post-presidential career in the House of Representatives, where he was a strong advocate for civil liberties and abolitionism.

Andrew Jackson

The seventh President of the United States (1829–1837) known for his populist policies and for being the founder of the Democratic Party.