1) An investment is expected to generate cash flows of $20000 next year (at time t=1), and $10000 in two years at time t=2

1) Computation of Present Value of the stream of Cash Flows:

Present Value of the stream of Cash Flows = Future Cash Flows * Present Value of Discounting Factor(rate%,time period)

= 20,000/1.1+10,000/1.1^2+51111.11/1.1^2

= $18,181.82 + $8,264.46 + $42,240.59 

Present Value of the stream of Cash Flows = $68.686.87

Workings:

Value after year 2 = (Cash flow for year 2*Growth rate)/(Required return-Growth rate)

=10,000*(1-0.08)/(0.1-(0.08))

=9200/0.18

=51111.11 

2) Computation of Effective Annual Rate of Return (EAR)

Given,

Monthly deposits = $200

Amount after 40 Years or Future Value = $936264.05

First we calculate Monthly Rate using Rate Function in Excel:

=rate(nper,pmt,-pv,fv)

Here,

Rate = Monthly Rate = ?

Nper = 40 years * 12 months = 480 months

PMT = $200

PV = 0

FV = 936264.05

Substituting the values in formula:

=rate(480,200,0,-936264.05)

Rate or Monthly Rate = 0.75%

So, monthly rate required is 0.75%

Effective Annual Rate (EAR) = (1 + Monthly Rate)^12 - 1 = (1+0.0075)^12 - 1 = 9.38%

So, effective annual rate of return (EAR) is the advisor assuming that the fund will provide is 9.38%.