In 1958, Bear Bryant was the highest-paid college football coach, with a salary of $142,998
The Correct Answer and Explanation is:
The correct answer is a. Bryant’s salary was $494,803, Saban’s was $1.930 million.
To determine each coach’s salary in base period dollars, we need to adjust their nominal salaries for inflation using the Consumer Price Index (CPI) for their respective years. This calculation converts the dollar amounts from different time periods into a standardized value, allowing for a fair comparison of their purchasing power. The formula to find the value in base period dollars is:
Value in Base Period Dollars = (Nominal Value / CPI of the year) × 100
First, we will calculate the value of Bear Bryant’s 1958 salary in base period dollars. His nominal salary was $142,998, and the CPI in 1958 was 28.9.
Bryant’s Salary = ($142,998 / 28.9) × 100 = $4,948.03 × 100 = $494,803
So, Bear Bryant’s salary had the purchasing power of $494,803 in base period dollars.
Next, we will perform the same calculation for Nick Saban’s 2007 salary. His nominal salary was
4million(4million(4,000,000), and the CPI in 2007 was 207.3.
Saban’s Salary = ($4,000,000 / 207.3) × 100 = $19,295.71 × 100 = $1,929,571
This value is approximately $1.930 million.
By converting both salaries to the same base period standard, we can accurately compare their real economic value. The results show that although Bear Bryant was very well compensated for his era, Nick Saban’s real salary in 2007 was substantially higher. This calculation confirms that the values presented in option (a) are correct.
