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Q4. One investment plan that you can buy on 1st December 2020 promises to give you certain payment of Rs.5000 on 1st December 2022. Then

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Q4. One investment plan that you can buy on 1st December 2020 promises to give you certain payment of Rs.5000 on 1st December 2022. Then the payment will grow at 10% per annum. Six such payments will be made, and the last payment will be made on 1st December 2027. a) Draw the cash flow diagram. (1) 1 (2) b) What is the price you would pay to buy such a product if your required rate of return is 10% per annum? c) What is the equivalent equal annual cash flow amount if the amount is paid for 7 years (1st December 2021 to 1" December 2027) in seven equal installments instead of six growing installments? (2)

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