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Jimmy Football is retiring from his sport. Under terms defined by his professional league, Jimmy has...

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Finance

Jimmy Football is retiring from his sport. Under terms definedby his professional league, Jimmy has a choice. He can receiveeither (a) monthly payments of $21,000 each for 20 years (240 totalmonthly payments) with the first monthly payment occurringprecisely five years from today or (b) monthly payments of $19,000each for 20 years (240 total monthly payments) with the firstmonthly payment occurring one month from today. A discount rate of2.64%/year is appropriate for valuing these cash flows. Aninnovative investments firm in Dallas, TX wants to purchase therights to this retirement package today. Jimmy is interested inselling the rights in exchange for a lump sum of cash today. Bothparties agree on all information provided here. Calculate a fairprice at which such an exchange could occur.

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