HI5002 FINANCE FOR BUSINESS
Question 2
You have $50,000 saving and are considering a 30-year investment which is offered in two phases:
Phase 1: Investing that $50,000 as a lump sum in an investment in the securities market for 20 years. Your securities broker recommends two alternative options: Option A pays interest rate of 11.87%, compounding daily. Option B pays interest rate of 12%, compounding quarterly.
Phase 2: At the end of 20 years, putting the total amount accumulated in the first phase into another investment, which will pay you an equal income at the end of each year for 10 years.
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