Four years from now you will receive the first of seven annual $100 payments. The current interest rate is 7%, but by t=3, the rate will have risen to 8%. What is the present value of this cash stream? Sol. $425 4. You are considering investing $674 in a 5-year annuity due. The rate of return you feel you should earn is 10%. What annual cash flow from the annuity due will provide you with the required return? Sol. $162