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Einstein something, something, compound interest. Amazing what saving money at an 8% interest rate will do for your future self! The S&P has only returned 4.8% CAGR [1] from 2000-2018 so that was a pretty tremendous ROI for Bonilla. [1] - http://www.moneychimp.com/features/market_cagr.htm
Interest rate in India has been largely in the 8-9% in the last 15 years. I hear it was in the double digits in the early 90s.
If I were an athlete I'd push for a contract like this, being young with a ton of money can be a recipe for disaster.
Earlier quoted context omitted.
I don't see how it was even a particularly bad contract, let alone the "worst in sports history". Borrowing money at 8% is a pretty reasonable commercial lending rate for the time (30-year fixed mortgages were only a couple points lower). So, they took out a $5.9MM loan from Bonilla to pay Bonilla, accrued interest for 11 years without making any payments, and then started paying it off on a 25 year amortization sche…
It was bad for Bobby Bonilla.
Fun fact -> They offered this because they were getting such good returns (greater than 8%) through Bernie Madoff, and figured they could just pay off the contract interest through that
The article doesn't mention that team owner Fred Wilpon thought deferring Bonilla's contract was a great idea because he could use the savings at the time to invest in Bernie Madoff's fund. https://www.nytimes.com/2012/02/21/sports/baseball/mets-saw-...
That seems like just doubling down in a bad way.