Suppose that Ray Allen, a basketball player for the Seattle Supersonics, will become a free agent at the end of this NBA season.Suppose that Allen is considering two possible contracts from different teams.Note that the salaries are paid at the end of EACH year.

\begin{array}{lll} & \text { Contract \#1 (Seattle) } & \text { Contract \#2 (Portland) } \\\text { Signing bonus (paid today) } & \$ 1 \text { million } & \$ 1 \text { million } \\\text { First-year salary } & \$ 2 \text { million } & \$ 4 \text { million } \\\text { Second-year salary } & \$ 4 \text { million } & \$ 4 \text { million } \\\text { Third-year salary } & \$ 5 \text { million } & \$ 3 \text { million }\end{array}

The interest rate is 10%.Based on this information, which of the following is true?
A)Allen should take the Seattle contract because it has a higher present value
B)Allen should take the Portland contract because it has a higher present value
C)Allen is indifferent between the two contracts because they are both worth $12 million
D)Allen is indifferent between the two contracts because they are both worth $10.9 million

From the Fisher Equation We See That the Nominal Interest

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