On July 1, 2000, the New York Mets reached an agreement with Bobby Bonilla to...
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Finance
On July 1, 2000, the New York Mets reached an agreement with Bobby Bonilla to defer the remaining
$5.8
million on Bonillas contract (with interest), which would have otherwise been due to be paid immediately. The deferment agreement called for the salary to be paid in 25 equal installments, with the first payment being made on July 1, 2011. The agreement stipulated that the relevant interest rate applied to this deal would be
8.7%.
Beginning on July 1, 2011 (and every July 1 for the following 24 years), how much was Bobby Bonilla paid by the Mets? In other words, what is the value of each annual salary installment?
(Please note: The details of the above agreement have been altered slightly from the actual scenario presented in the weekly lecture.)
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