How Much Did Peterson Lose By Not Cashing His Check?

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The Situation
NFL cornerback Patrick Peterson received a $15,361,000 signing bonus as part of a five-year,
$70 million contract extension. However, he didn’t immediately cash the check. When
asked why, he said, “I just haven’t gotten around to it.”

The Challenge(s)
How much interest money did Peterson lose by not immediately cashing his check?

Question(s) To Ask
These questions may be useful in helping students down the problem solving path:
What is a guess that is too low?
What is a guess that is too high?
What is a guess that you know is wrong?
What is your best guess?
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 What information do we need to figure this out?
How much money would he have lost if he took 3 months to deposit the check?
How much money would he have lost if he took n months to deposit the check?

Consider This
This context makes for an interesting application of calculating interest. Normally we don’t
think much about the interest we lose out on from not immediately cashing a check, but
when the check is for over $15,000,000, it becomes noteworthy. To determine the amount
of interest money Peterson lost, students will need to know:
the original amount of money
the amount of time that passed between the date the check was issued and the date
the check was deposited.
the interest rate for the money could have earned had it been deposited.

The image below is a screen shot from Bleacher Report that provides some of the necessary
information.

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The check was written for $15,361,000 so that is the original amount of money. Assuming
that Peterson received the check on the date the contract was signed, he got it on July 29,
2014. While we don’t know the exact date he cashed it, I believe that it was not cashed as of
the day the story was written which was August 25, 2014. There are 27 days from the date
he received it to the date of the article.

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As for the interest rate, these were the rates available for certificates of deposit (CDs) in
August 2014. In general, CD interest rates are slightly higher than the rates earned from a
savings or money market account. They are usually lower than the rates you could earn
through other means, such as stocks, but have little risk unless the bank goes out of
business. The best interest rates available were 1.1% compounded daily.

In terms of actually finding the amount of money Patrick Peterson lost by not depositing his
check, I am using the formula of: A = p(1 + r/n) ^ (n * t) where p is the amount of principal, r
is the rate, n is the # of times per year the amount is compounded, and t is the # of years.

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 p = 15361000
r = 1.1% or 0.011
n = 365 for daily compounding
t = 27/365 (fraction of the year it was compounded which is the # of days he waited to
cash the check divided by 365 days per year)

This gives us a total of $15,373,504.12 which results in $12,504.12 in lost interest over the 27
days. Now this amount does not include deductions for income tax but is still a staggering
amount of money for 27 days of conservative interest. If he had earned a more aggressive
interest rate like 6%, the interest would have been over $68,000 for the same period of
time! I believe that if Patrick Peterson knew he could have earned enough money to buy a
small car or go on a trip to anywhere in the world, he would have deposited the check
sooner.

I have also made an interactive graphical version of this problem using Desmos with a slider
for the rate. It is fun to play around with the rate to see how things change. The image
below shows you a sneak preview with the amounts of money at day 0 and day 27.

Teacher Work
Read about how Tina Palmer implemented this problem with her students. She used the
Math Forum’s Powerful Problem Solvingstrategies to implement the problem to great
success.

Content Standard(s)

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CCSS 7.RP.3 Use proportional relationships to solve multistep ratio and percent
problems. Examples: simple interest, tax, markups and markdowns, gratuities and
commissions, fees, percent increase and decrease, percent error.
CCSS N-RN.2 Rewrite expressions involving radicals and rational exponents using the
properties of exponents.
CCSS A-SSE.1 Interpret expressions that represent a quantity in terms of its context.★
CCSS A-SSE.3c Use the properties of exponents to transform expressions for
exponential functions. For example the expression 1.15 t can be rewritten as (1.15 1/12)12t ≈
1.01212t to reveal the approximate equivalent monthly interest rate if the annual rate is
15%.
CCSS A-SSE.4 Derive the formula for the sum of a finite geometric series (when the
common ratio is not 1), and use the formula to solve problems. For example, calculate
mortgage payments.★
CCSS A-REI.11 Explain why the x-coordinates of the points where the graphs of the
equations y = f(x) and y = g(x) intersect are the solutions of the equation f(x) = g(x); find
the solutions approximately, e.g., using technology to graph the functions, make
tables of values, or find successive approximations. Include cases where f(x) and/or
g(x) are linear, polynomial, rational, absolute value, exponential, and logarithmic
functions.★
CCSS F-IF.4 For a function that models a relationship between two quantities, interpret
key features of graphs and tables in terms of the quantities, and sketch graphs
showing key features given a verbal description of the relationship. Key features
include: intercepts; intervals where the function is increasing, decreasing, positive, or
negative; relative maximums and minimums; symmetries; end behavior; and periodicity.★
CCSS F-IF.7e Graph exponential and logarithmic functions, showing intercepts and end
behavior, and trigonometric functions, showing period, midline, and amplitude.
CCSS F-IF.8b Use the properties of exponents to interpret expressions for exponential
functions. For example, identify percent rate of change in functions such as y = (1.02)t,
y = (0.97)t, y = (1.01)12t, y = (1.2)t/10, and classify them as representing exponential
growth or decay.
CCSS F-BF.2 Write arithmetic and geometric sequences both recursively and with an
explicit formula, use them to model situations, and translate between the two forms.★
CCSS F-LE.1c Recognize situations in which a quantity grows or decays by a constant
percent rate per unit interval relative to another.
CCSS F-LE.4 For exponential models, express as a logarithm the solution to abct = d
where a, c, and d are numbers and the base b is 2, 10, or e; evaluate the logarithm
using technology.
CCSS F-LE.5 Interpret the parameters in a linear or exponential function in terms of a
context.

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Source(s)
Bleacher Report
Bank Rate (rates as of August 2014)
Desmos

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