1. Your client has provided an investment which pays $25,000 in 2 years, $40,000 in 5 years and a further $80,000 in 8 years. The interest rate over the period of the investment is a nominal rate of 15% p.a., compounded monthly. If your client can buy the investment today for $60,000 would you recommend that this is a good investment? Why or why not? 2. Pontification Ltd has a number of investment options however your client has limited these investments to only the following two options: The first investment costs $100,000 and pays the following cash flows in years 3 to 8 Yr 3: $25,000, Yr 4: $30,000, Yr 5: $20,000, Yr 6: $10,000, Yr 7: $50,000 and Yr 8: $80,000 The second investment option costs $250,000 and is a perpetuity which pays $25,000 a year with the 1st cash flow occurring at the end of year 3 Your client indicates that he requires a rate of return of 10% pa. which can be applied to both of these investments. Identify for him whether these investments are good (or not) 3. Two annuities are available for purchase that your client has identified. The first annuity pays $7,000 each six-month period over a 5 year period, at a nominal rate of 9% pa. The annuity has an annual fee of $300, paid at the beginning of each year The second annuity pays $1,000 each month, again over 5 years at a nominal rate of 10% pa. and does not have an annual fee If each of the annuities cost S50,000, identify which of the annuities you would recommend to your client