“- Part A (435 total words) i. Explain what a discount rate is and how it may be used by investors. i.i. Briefly describe two factors that investors might take into account when deciding what discount rate to use. b. An investor is faced with three possible investment choices, shown in Table 1 below. Using the Present value and discounted rate segment of the Investment Tool, calculate the rate of return from each investment product. Explain the figures you have entered in the investment Tool and, based on your results, briefly explain which the more attractive product is. (18 marks) c. Briefly describe one other feature of the investment products that a rational investor should take into account in order to make their decision in 1b. d. Now consider a government bond similar in many respects to Product 2 in Table 1, except that no coupon is paid and the current price is 100 (all other features are unchanged). Moreover, inflation is forecast to be 3% a year. TMA 01 – Part B (1198 total words) Question 2 Table 2 below shows five alternative ways to invest a 100,000 lump sum. Explain how each of the investments might be exposed to the three high-level risks: capital risk, income risk and liquidity risk. Discussed how your assessment of each investment might change if the expected inflation rate rose from 2% to5% a year (50 marks).”