Question 4 You are making investment decisions in the next 3 years from 2018 to

Question

Question 4 You are making investment decisions in the next 3 years from 2018 to 2020. Through market analysis, you identify 4 potential investment projects. In the beginning each year, you will have SS30,000 available principal for investment. The descriptions of the investment projects are as below: Project 1: you can invest in this project at the beginning of each year. The profit and your principal will be received at the end of the year. The rate of return for this project is 20%. Project 2: You can invest in this project at the beginning of Year 2018. The profit and your principal will be received at the end of Year 2019. The rate of return for this project is 50%. You cannot invest more than S$20,000 for this project. e Project 3: You can only invest in this project at the beginning of Year 2019, and the profit and your principal will be received at the end of Year 2020. The rate of return for this project is 60%. You cannot invest more than S$ 15,000 for this project. Project 4: You can only invest in this project at the beginning of Year 2020, and the profit and your principal will be received at the end of Year 2020. The rate of return for this project is 30%. You cannot invest more than S$10,000 for this project. Develop a quantitative model to propose an optimal investment strategy (25 marks)

Explanation / Answer

Since the time frame is maximum for the first case and there is no limit of discount. one can easily calculate the aggregate return which is 41040 in the first option.

The other returns are lesser

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