Before the 2013 season, the Los Angeles Angels signed outfielder Josh Hamilton to a contract that would
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a. Some newspaper reports described Hamilton as having signed a $125 million contract with the Angels. Do you agree that $125 million was the value of this contract? Briefly explain.
b. What was the present value of Hamilton's contract at the time he signed it (assuming an interest rate of 10 percent)? For simplicity, you can ignore the $2 million given to charity.
c. If you use an interest rate of 5 percent, what was the present value of Hamilton's contract?
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