In planning for your retirement, you are considering the various CPF LIFE annuity plans. For the Basic Retirement Plan (BRP), the sum required upfront is $85,500 and it pays out $750 monthly for as long as you live. Alternatively, the Enhanced Retirement Plan (ERP) requires a sum of $256,500 and the monthly payout is $2,000. For both annuity plans, interest earned is 4% per annum and payout is made at the end of each month when you turn 65. To help you save up for the sum required in the annuity plan, you are considering investing in a 6% coupon (paid semi-annually) corporate bond that matures in 8 years at par of $1,000. It currently trades at $945 and you expect a return of 7% per year. (a) Calculate the minimum number of years you need to receive the payout for the basic retirement plan for it to be worth it.

(b) Determine which annuity plan is better assuming you are able to live up to 85. (c) Appraise whether you should invest in the corporate bond today. (d) Describe three (3) factors that will affect the expected return on the corporate bond.