Quote:
Originally Posted by Aarongavey
I suspect because the time value of that money from July 1st until end of season if he gets a 7 percent return is roughly another 600,000 dollars in year one (this year). If he invested the bonus in year two over the three months before an nhl player even receives a cheque he would get an additional 250,000 at 7 percent in the first 3 months. Nice easy way for the player to make more money than the yearly contract amount. Front loading those bonuses means he probably will earn closer to 11.5 each year (in a world with no escrow, either way his money will make money it would not have made if he had to wait until March and April for his big cheques).
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Your interest rates are way off. For time value of money, you have to use risk-free rates. Try 2% for a year, and 1% for 3 months. 7% is an investment return that comes with a commensurate amount of risk.
The issue the league has with these deals is that they give an advantage to the rich teams that can afford to do them.