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Kit has been advised that the amount of the payment from the estate of her...

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Accounting

Kit has been advised that the amount of the payment from the estate of her family relative will be AUD1.5 million and the payment will be made within 30 days. Kit and Jo have decided to postpone making a decision on their home for 12 months and to use this time to think about how best to use this money. During this period the money will be invested in low risk investments.

Discuss and compare two examples of low risk investments suitable for Kit and Jo. Nominate one as your recommendation (make sure you state your reasons).

One possible use for part of the money is to establish an investment for their children with the objective that when they turn 18 years old they can access the money to fund a long term overseas trip. Kit and Jo are considering an amount of AUD50,000 (AUD25,000 for each child) in a medium risk investment with all of the returns reinvested.

Discuss and compare two examples of medium risk investments suitable for Kit and Jo. Nominate one as your recommendation (make sure you state your reasons).

Assuming a return of 5% per annum, what will be the closing balance of the investment in 10 years time (ignore tax).

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