Zulu Corporation Hires a New Chief Executive Officer and Promises

Multiple Choice

Zulu Corporation hires a new chief executive officer and promises to pay her a signing bonus of $2 million per year for 10 years, starting five years after she joins the company. The liability for this bonus when the CEO is hired:

A) Is the present value of a deferred annuity.
B) Is the present value of an annuity due.
C) Is $20 million.
D) Is zero because no cash is owed for five years.