Victor Oladipo is retiring from the NBA. Under terms defined by his professional league, Mr. Oladipo has a choice. He can receive either (a) monthly payments of $21,000 each for 20 years (240 total monthly payments) with the first monthly payment occurring precisely five years from today or (b) monthly payments of $18,425 each for 20 years (240 total monthly payments) with the first monthly payment occurring one month from today. The appropriate rate for valuing these cash flows is 2.64%/year. A creative investments firm in Carmel, IN wants to purchase the rights to this retirement package today. Victor is interested in receiving a lump sum of cash today in exchange for the retirement package. Both parties are in agreement on all information provided here. Calculate a fair price at which such an exchange could occur
Victor Oladipo is retiring from the NBA. Under terms defined by his professional league, Mr. Oladipo has a choice. He can receive either (a) monthly payments of $21,000 each for 20 years (240 total monthly payments) with the first monthly payment occurring precisely five years from today or (b) monthly payments of $18,425 each for 20 years (240 total monthly payments) with the first monthly payment occurring one month from today. The appropriate rate for valuing these cash flows is 2.64%/year. A creative investments firm in Carmel, IN wants to purchase the rights to this retirement package today. Victor is interested in receiving a lump sum of cash today in exchange for the retirement package. Both parties are in agreement on all information provided here. Calculate a fair price at which such an exchange could occur
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