Discuss the various risks involved if you’re an investor undertaking the 5 years defined returns plan.

Coursework #1
SMM608 Individual Assignment:
Optionality in Defined Returns Plans?
We are in 2010. A large international investment house is launching an aggressive campaign to encourage “long-term” stock investments among private UK investors. Using information from the quotes and catalogue sections below , prepare a report answering the following questions. Marks for the various parts of the report are
indicated in parentheses.
1) Discuss the various risks involved if you’re an investor undertaking the 5 years defined returns plan.
2) Explain embedded optionality, if any, for each of the 4 years and 6 years plans respectively.
3) Determine the value of the option embedded in the 4 years defined returns plan, discuss input parameters and explain overall approach .
4) If no costs are incurred by existing customers at contract origination, under which conditions will it be appropriate to sell their 4 years defined returns plan before maturity assuming a 9.8% penalty is deducted from the original investment? Provide examples for your answers.
Maximum word length excluding tables and appendices containing spreadsheet results and calculations is 2000 words. The submission deadline is 1st of April 2022 at 23:50. Although you can work in groups, the assignment will be marked on an individual basis .
To be submitted electronically on the Keats 608 platform . You are not required to submit your excel files. This coursework carries 25% of the assessed marks for this module.