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Client's Investments: 1. Your client has provided an investment which pays the following cash flows (with the payments being timed relative to today"): $5,000 in 12 months, $5,000 in 4 years, $8,000 in 5 years and a further $3,000 in 8 years. The interest rate over the period of the investment is a nominal rate of 6% p.a., compounded monthly. If your client can buy the investment today for $20,000 would you recommend that this is a good investment? Why or why not? (10 marks) pv 2. Effortless Investments has proposed two investments. The first investment pays the following cash flows in years 1 to 6: Yr 1: $1,000, Yr 2: $3,000, Yr 3: $5,000, Yr 4: 57.000. Yr 5: $9,000 and Yr 6: $11,000. The second investment is a perpetuity which pays $2,500 a year with the Ist cash flow occurring at the end of year 3. Both investments cost $30,000. Your client requires a rate of return of 6% p.a. which can be applied to both investments. Identify whether these investments are good (or not). (14 marks) 3. Lastly, your client has independently identified two annuities for your advice. The first annuity pays $1,000 each three-month period over 6 years, at a nominal rate of 8% p.a. This annuity also has a lump sum payment at maturity (at the end of the 6th year) of $8,000. The second annuity pays $500 each month, again over 6 years, at a nominal rate of 7% p.a. This investment has an annual fee of $400, paid at the start of the year, starting immediately. If both annuities cost $25,000, identify which (if any) of the annuities you would recommend to your client. (16 marks) Client's Investments: 1. Your client has provided an investment which pays the following cash flows (with the payments being timed relative to today"): $5,000 in 12 months, 85.000 in 4 years, 88.000 in 5 years and a further $3,000 in 8 years. The interest rate over the period of the investment is a nominal rate of 6% p.a., compounded monthly. If your client can buy the investment today for $20,000 would you recommend that this is a good investment? Why or why not? (10 marks) PY 2. Effortless Investments has proposed two investments. The first investment pays the following cash flows in years 1 to 6: Yr 1: $1,000, Yr 2: $3,000, Yr 3: $5,000, Yr 4: 57.000. Yr 5: $9,000 and Yr 6: $11,000. The second investment is a perpetuity which pays $2,500 a year with the Ist cash flow occurring at the end of year 3. Both investments cost $30,000. Your client requires a rate of return of 6% p.a. which can be applied to both investments. Identify whether these investments are good (or not). (14 marks) 3. Lastly, your client has independently identified two annuities for your advice. The first annuity pays $1,000 each three-month period over 6 years, at a nominal rate of 8% p.a. This annuity also has a lump sum payment at maturity (at the end of the 6th year) of $8,000. The second annuity pays $500 each month, again over 6 years, at a nominal rate of 7% p.a. This investment has an annual fee of $400, paid at the start of the year, starting immediately. If both annuities cost $25,000, identify which (if any) of the annuities you would recommend to (16 marks) your client

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