5. 6. 7. Present and future value of an annuity a. Calculate the present value of the following cash flow stream at 6% +300 +300 +300 1-0 t-1 1-2 1=3 b. PV= What is the Future value of this stream after 3 years? FV=PV(Ir)' Cash stream 0 a. Calculate the present value of $300 received forever from period 1. (Interest rate is 6%). Present value of Cash Stream "0" at time "0", "PV." is PV Cash stream 1: b. C d. Suppose you are at the end of year 3. Calculate the present value of a cash flow of $300 received forever. (Hint: This cash flow is received forever from the end of year 4). Value of cash stream "1" at period "3", "PV," is PV Now what is the present value of PV,, today (ie. time t=0) at 6% ? Value of cash stream "1" at period "3", "PV" is PV- What is the difference between PV, and PV... Present value of $300 annuity PV-PV Does your answer to 6d match with answer to 5a? Why or why not