## Questions:

a.Sandy expects to receive the following stream of cash flows from an investment over the next 5 years:

End of year Cash flow ($)

1 400

2 800

3 500

4 400

5 300

If the relevant rate of interest is 9% per annum on this investment, how much should she pay for this investment opportunity? (4 marks)

b.Lee has taken out a loan of $100,000 with an interest rate of 10% per annum. The loan is to be paid off by 20 equal quarterly payments; the first payment is due today. How much will Lee’s quarterly payment be? (4 marks)

c.Dianne won a lottery prize of $200,000. She invested the entire amount and expects a yearly return of 10% per annum compounded monthly on her investment. Dianne will receive 150 equal monthly payments with the first payment due to be paid to her in exactly 2 years. Find the size of the monthly payments that Dianne will receive. (7 marks)

Question 2 (15 marks)

This question relates to material covered in the Topics 1 to 3. This question addresses the 5th and 6th subject learning outcomes.

Following is an example of a cash flow timeline developed using the Table Function within MS Word. Please use this example as a means to develop a similar timeline in your answer to the following question

1. Using the Table function within MS Word, draw a time line showing the above cash flows and interest rates .

2. What will be the value of all these cash flows at each of the following times:

-Time 1

-Time 5

-Time 10