Suppose you have just signed a professional contract to play cricket in Argentin

Question

Suppose you have just signed a professional contract to play cricket in Argentina. The contract is for 4 years and is as follows. You get an immediate signing bonus of $280,000, followed by four years of quarterly payments of $75,000. Finally, you will receive a lump sum payment of $350,000 at the completion of the contract.

You plan to invest half of your signing bonus and 20% of all other payments in an account that earns 7.5%, compounded quarterly. Given this, and assuming no other payments, how much would you have cumulatively in the account at the end of 20 years?

Explanation / Answer

All Amounts in $ The amount to be invested Signing Bonus - 50% 140000 Four Years of Quarterly payments of $ 75,000 = $ 75,000 X 16 = $ 900,000 - 20% 180000 Lump Sum Payment - $ 350,000 = 20% 70000 Total 390000 Investing this amount @ 7.5% compounded quarterly for 20 years will earn a cumulative amount of $ 1,723,750.27.

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