Question: Around January 1, 1993, Barbra Streisand signed a contract with Sony Corporation for $2 million a year for 10 years. Suppose the first payment was made on the day of signing and that all other payments were made on the first day of the year. Suppose also that all payments were made into a bank account earning 4% a year, compounded annually.
(a) How much money was in the account
(i) On the night of December 31, 1999?
(ii) On the day the last payment was made?
(b) What was the present value of the contract on the day it was signed?