Question

Around January 1, 1993, Barbra Streisand signed a con- tract 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, com- pounded annually

How much money was in the account (i) On the night of December 31, 1999?

Answer 1

The amount of money in the account on the night of December 31, 1999, was $18,351,200.

Step-by-step explanation:

To find the amount of money in the account on the night of December 31, 1999, we need to calculate the future value of the $2 million annual payments for 7 years at an interest rate of 4% compounded annually.

Using the formula for compound interest: FV = P(1+r)^n

where FV is the future value, P is the payment or principal, r is the interest rate, and n is the number of periods, we can calculate:

Calculate the value of each payment: $2 million x (1+0.04)^7

= $2 million x 1.3108

= $2,621,600

Calculate the future value by multiplying the value of each payment by the number of payments:

$2,621,600 x 7

= $18,351,200

Therefore, the amount of money in the account on the night of December 31, 1999, was $18,351,200.