Final answer:
The student requested the calculation of the cross-over rate between two investment projects and their payback periods. Project A's payback period is 12 months, while Project B's is 10 months. The cross-over rate calculation would involve equating the present values of both projects' cash flows at a specific discount rate.
Step-by-step explanation:
The student is trying to assess two different investment projects and calculate their respective payback periods and the cross-over rate. Project A has a payback period of 12 months, as the initial investment of £16,000 is recouped after one year with a return of £19,200. Project B requires an initial investment of £10,000 and returns £1,010 monthly over a year. The payback period is 10 months, as by the end of the tenth month, the total return equals the initial investment (10 x £1,010 = £10,100). To calculate the cross-over rate, we need to find the discount rate at which the present value of both projects' cash flows are equal. Without providing the actual calculations, it is mentioned to provide the exact cross-over rate in percentage to one decimal place, which would likely involve an equation balancing the present value of both projects' cash flows.
When considering portfolio investment, business people often take into account the expectations regarding exchange rate movements. An example given is a U.S. investor considering British bonds and anticipating a change in the pound's value against the dollar, potentially yielding profits if the predictions are accurate.