Client's Investments: 1. Your client has provided for your evaluation, an investment which pays $20,000 in 12 months, $15,000 in 3 years, $10,000 in 4 years and a further $40,000 in 7 years. The interest rate over the period of the investment is a nominal rate of 18% p.a., compounded monthly If your client can buy the investment today for $50,000 would you recommend that this is a good investment? Why or why not? (10 marks) 2. DIY Investments Ltd has proposed two investments to your client, however your client is unsure of their potential, with your task being to provide some advice on these investments. The first investment costs $60,000 today and pays the following cash flows in years 1 to 6: 2: $15,000, Yr 3: $20,000, Yr 4: $25.000, Yr 5: $30,000 and Yr 6: $35.000. The second investment option is a perpetuity which pays $6,000 a year with the 1" cash flow occurring at the end of year 4. Your client can buy the investment today for $40,000. Your client indicates that he requires a rate of return of 12% p.a. which can be applied to both of these investments. Identify for him whether these investments are good (or not). (14 marks) 3. Two annuities, which your client has identified, are available for purchase. The first annuity pays $6,000 each three-month period over 4 years, at a nominal rate of 12% p.a. This annuity also has a lump sum payment at maturity (at the end of the 4 year) of S30,000. The second annuity pays $2,500 each month, again over 4 years, at a nominal rate of 11% p.a. This investment has an annual fee of $1,000, paid at the start of the year, starting immediately. If each of the annuities cost $100,000, identify which (if any) of the annuities you would recommend to your client. (16 marks)