Consider the streams of income given in the following table:
Income Stream
End of Year A B
1 $9,000 $6,000
2 $8,000 $7,000
3 $7,000 $8,000
4 $6,000 $9,000
Total $30,000 $30,000
a. Find the present value of each income stream, using a discount rate of 1 %, then repeat those calculations using a discount rate of 9%
b. Compare the calculated present values and discuss them in light of the fact that the undiscounted total income amounts to $30,000 in each case.