Your client has provided another investment which pays the following cash flows (with the payments being...

Transcribed Image Text:

Your client has provided another investment which pays the following cash flows (with the payments being timed relative to 'today'): $3,500 in 12 months, $3,000 in 4 years, $3,000 in 5 years, $9,000 in 6 years and a further $3,800 in 9 years. The interest rate over the period of the investment is a nominal rate of 6% per annum, compounded semi-annually. If your client can buy the investment today for $20,000 would you recommend that this is a good investment? Why or why not? Would your recommendation change if the investment can be bought for $18,000 today? (12 marks) Your client has provided another investment which pays the following cash flows (with the payments being timed relative to 'today'): $3,500 in 12 months, $3,000 in 4 years, $3,000 in 5 years, $9,000 in 6 years and a further $3,800 in 9 years. The interest rate over the period of the investment is a nominal rate of 6% per annum, compounded semi-annually. If your client can buy the investment today for $20,000 would you recommend that this is a good investment? Why or why not? Would your recommendation change if the investment can be bought for $18,000 today? (12 marks)

Answer rating: 100% (QA)

o evaluate whether the investment is a good option or not we need to calculate the present value of ... View the full answer