Question 5 [20 marks] Benjamin and Stephanie's mother/mother-in-law, Suzy, issued a $1 000 000 twenty-five year interest-only loan to the couple. Under the terms of the loan, they make annual payments of interest every year (at 3% p.a.); the final payment will consist of the regular interest amount together with the return of principal. Unbeknownst to the couple, Suzy has invested each interest payment at 3.5% p.a. Her intention is to give the accumulated amount to the couple when the loan matures. Allowing for this gift, what is Benjamin and Stephanie's net payment to Suzy when the loan matures? Include in your answer a fully labelled cash flow diagram (drawn from the perspective of Suzy's investment fund), your chosen valuation date and an equation of value.

Question 6 [20 marks] Strata committee SP666 has resolved to accumulate a sum of $1 000 000 in ten years' time in order to pay for building repairs. Quarterly payments (in advance) will be made over the ten years, commencing immediately. SP666 has secured a return on its investment for the first five years of j2 =2% p.a. and for the second five years of j2 =3% p.a. What amount does SP666 have to pay each quarter? Include in your answer a fully labelled cash flow diagram (drawn from SP666's perspective), your chosen valuation date and an equation of value.