PS2_H - retires and so is planning to start a retirement...

Info icon This preview shows page 1. Sign up to view the full content.

View Full Document Right Arrow Icon
Problem Set 2 (Harder Questions) 1. Paulo Gattuso was cut by his team before the NFL draft. He has been playing football for 8 years and suffered an injury towards the middle of the last season and has since been in rehab. He is now likely to be a back-up middle linebacker rather than a starter. Although this is a little hard on him, he is for the most part OK with this role. He has gotten the following three offers: Ravens Quarter of a million signing bonus plus $800,000 for the first two years and $600,000 for years 3 and 4 Chiefs A million dollar signing bonus and half a million dollars for each of the first three years Packers A signing bonus of $200,000 plus $750,000 for the first 2 years and $400,000 for the following three years Except for the signing bonus, assume all cash flows to be at the end of the year. Assume Paulo’s opportunity cost to be 7%. Which of the teams is offering him the most cash flow? 2. Janet Hammermiester just turned 30. She plans to be financially independent when she
Image of page 1
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: retires and so is planning to start a retirement plan. Janet expects to contribute $3000 at the end of year 1 and her contribution into the plan to increase by 1% each year. She plans on retiring at the age of 65 (so she expects to make contributions into the plan for 35 years). The pension plan is expected to generate a return of 8% each year. She comes from a family blessed with long lives and so she is expecting to live for 25 years after she retires. The pension plan that she is looking into offers a deal where the sum-total of the retirement money can be turned into an annuity that lets her withdraw the lump-sum she has at the time of retirement over 25 equal installments if she agree to a return of 5% each year. What will Janet be able to get each year starting with her 66 th birthday till her 90 th birthday?...
View Full Document

{[ snackBarMessage ]}

What students are saying

  • Left Quote Icon

    As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

    Student Picture

    Kiran Temple University Fox School of Business ‘17, Course Hero Intern

  • Left Quote Icon

    I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern