QUESTION ONE (15 MARKS)

Suppose you wish to have RM1.5 million at the end of 25 years from now. You are considering two options of investment.

Alternative	A	B
Opportunity cost	12% p.a	10% p.a
Discounted	annually	semi-annually

a) Which one is the better option? (3 marks)

b) You can make two different investments. The amount that you will receive on the first investment is RM110 per year for three years. You will receive RM330 on the second investment in the third year and nothing in the first two years. If your required rate of return is 6 percent, what should you pay for each of these investments? (3 marks)