A Major League Baseball team signs a free agent player to a new contract, which includes...
A Major League Baseball team signs a free agent player to a new contract, which includes a $2 million signing bonus. If the player puts the money into an account earning 9%, compounded quarterly, how much will be in the account at the end of 5 years when his contract expires? Show work in excel
Homework Answers
Money in account at the end of 5 years is calculated using FV function in Excel :
rate = 9%/4 (Quarterly rate of return = annual rate of return / 4)
nper = 5 * 4 (total number of quarterly periods in 5 years = 5 * 4)
pmt = 0 (periodic deposit into account is zero)
pv = -2000000 (Amount put into account. This is entered with a negative sign because it is a payment into the account)
FV is calculated to be $3,121,018.40
Money in account at the end of 5 years is $3,121,018.40
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