1. You are considering two lottery payment streams, choice A pays R2000 today and choice B pays R2800 at the end of five years. using a discount rate of 5 per cent, based on present values, which would you choose? Using the same discount rate of 5 per cent, based on future values five years from now, which would you choose?( make your choices based purely on the time value of money).
2. You want to invest in an index fund which directly correlates to the overall South African stock market. how can you determine if the market risk premium you are expecting to earn is reasonable for the long-term?