a) You have an option to receive $21,650 in cash now or $5,000 per year over a period of five years. You can earn interest of 5% p.a. Which option will you choose? Show working

b) You are considering buying an issue of government stock that returns $5,000 interest every quarter. The maturity value of the stock is $250,000 and the remaining term to maturity is four years. If you require a return of 8% on the investment, how much should you pay for the stock? Show working