1.1. Write an essay on the institutional arrangements that ensure that managers work toward increasing the value of a firm.

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2. 1.2. Explain, using an example, the term agency costs as related to a corporation.

2. Question Part B (30 Marks – 5 Marks each)

1. 2.1. Explain the time value of money concept, focus on the key reasons for difference in value of money at different points of time.

2. 2.2. Which one would you prefer and why? Work out the value of these investments after 1, 5 and 20 years.

   1. An investment paying an interest of 12% compounded annually.

   2. An investment paying an interest of 11.7% compounded semi-annually.

2.3. Imagine you take a loan of 30000 euros @5.5% rate of interest to be repaid in equal monthly installments in 15 years. Calculate the equal monthly installments and also present the loan amortization table.

2.4 Retirement Planning: Write down your age today, and the retirement age in your country, round off in years. Imagine you need to accumulate 2Million Euros until your retirement age, and you have an option to invest your savings @ 4% per annum. If you choose to invest equal amount on yearly basis to have 2M Euros by your retirement, how much should you invest every year?