John is expecting to receive a cash flow stream of $20,000 for five years, starting in three years. If the relevant discount rate for the entire period is 10%. What is the PV (present value) of this cash flow stream? Does this stream represent an annuity due or an ordinary annuity?
Can someone please help me understand how to tackle this problem? I believe it is an ordinary annuity because payments are beginning in 3 years. I am confused on the rest because I cannot determine if the $20,000 begins at the end of year/term 3 and continues for 4 more years to make the total # of years/terms 7?