Question: (a) What is the value today of a stream of cash flows paying $500 at the end of each of the next 8 years? Assume an interest rate of 10%.
(b) What is the value today of a stream of annual cash flows paying $500 at the beginning of each of the next 8 years (i.e. the first cash flow will occur today)? Assume an interest rate of 10%. (Helpful hint: remember that the PVA table is compiled on the basis that the first cash flow occurs in one year's time.)