Consider the streams of income given in the following table.

a. Find the present value of each income stream, using a 1% discount rate, then repeat those calculations using an 8% discount rate.

b. Compare the present values and discuss them in light of the fact that the undiscounted total income amounts to $10,000 in each case.

______________________Income Stream

End of Year _____A _____________________B

1 ................. $ 4,000 ...................... $ 1,000

2 ................. $ 3,000 ..................... $ 2,000

3 ................. $ 2,000 ..................... $ 3,000

4 ................. $ 1,000 .................... $ 4,000

Total ........... $10,000 .................. $10,000