3. Price and present value [15 marks] Suppose a money manager has the opportunity to purchase a financial instrument that promises to pay 500,000 three years from now. She is offered a price of 350,000. Question 3.1. Should she buy the instrument if she requires an l 1% rate of return? Show your workings and briefly explain your answer. [5 marks] Question 3.2. Suppose now that the money manager is offered the same price (350,000) as in question 3.1, but now the instrument matures four years from now (instead of three years from now). Should she buy it if she still requires an 11% rate of return? Show your workings and briefly explain your answer. [5 marks]