Instead of paying the amount on the spot

Assignment Help Financial Management

Reference no: EM131022471

In the year 2000, the New York Mets (a professional baseball team) owed Bobby Bonilla (a baseball player) $5.9 million. Instead of paying the amount on the spot, the Mets and Bonilla agreed to defer his compensation in the following way: starting in 2011, Bonilla would receive $1.2 million every year until 2035 (that is 25 annual payments). Assume the interest rate is 5%, was this a good or bad deal for Bonilla?

Reference no: EM131022471

Questions Cloud

The YTM on a bond is the interest rate : The YTM on a bond is the interest rate you earn on your investment if interest rates don’t change. If you actually sell the bond before it matures, your realized return is known as the holding period yield (HPY). Two years from now, the YTM on your b..

Considering operating a lock-box system : Anne Teak, the financial manager of a furniture manufacturer, is considering operating a lock-box system. She forecasts that 500 payments a day will be made to lock boxes with an average payment size of $2,500. If the lock box makes the cash availabl..

How many years do these bonds have left until they mature : Shinoda Corp. has 8 percent coupon bonds making annual payments with a YTM of 7.4 percent. The current yield on these bonds is 7.75 percent. How many years do these bonds have left until they mature?

About the percentage change in price of bond : Bond J has a coupon rate of 7 percent and Bond K has a coupon rate of 13 percent. Both bonds have 20 years to maturity, make semiannual payments, and have a YTM of 10 percent. If interest rates suddenly rise by 2 percent, what is the percentage price..

Instead of paying the amount on the spot : In the year 2000, the New York Mets (a professional baseball team) owed Bobby Bonilla (a baseball player) $5.9 million. Instead of paying the amount on the spot, the Mets and Bonilla agreed to defer his compensation in the following way: starting in ..

The trade-off theory of capital structure : Describe and explain in 2-3 pages the trade- off theory of capital structure. How is it related to the use of debt instead of stock (equity financing) in order to raise capital?

The previous one to compensate for inflation : You want to deposit $X in your retirement account today. You plan to retire in 35 years and make your first withdrawal from your account (at time 35) of $100,000; you will make 19 additional annual withdrawals (your last one is at time 54) but each o..

The market capitalization rate-firms plowback ratio : The market capitalization rate for Admiral Motors Company is 11%. Its expected ROE is 15% and its expected EPS is $9. Required: If the firm's plowback ratio is 40%, what will be its P/E ratio? (Round your answer to 2 decimal places.)

How much would they have to save each year to reach goal : Your parents wanted to have $160,000 saved for college by your 18th birthday and they started saving on your first birthday. They saved the same amount each year on your birthday and earned 8% per year on their investments. How much would they have t..

User Account

All Pages