Football player Walter Johnson signs a contract calling for payments of $2,500,000 per year,to begin 10 years from now.To find the present value of this contract,which table or tables should you use?
A) The future value of $1
B) The future value of an annuity of $1 and the future value of $1
C) The present value of an annuity of $1 and the present value of $1
D) The present value of an annuity of $1

Question

Quizplus · Accepted Answer

To find the present value of a contract with payments starting in the future, we need to use the present value of an annuity of $1 and the present value of $1 tables. These tables provide us with the discounted value of future payments. The future value tables or the present value of an annuity of $1 tables alone would not be sufficient in this scenario.

Football Player Walter Johnson Signs a Contract Calling for Payments