In this workout, we've been told that an insurance company has bought a range of financial assets. That's 200 in derivatives, 200 in equities, and 200 in corporate bonds. And that's also the par value of those bonds. Now, we've been asked to calculate the investment income in years one to three assuming that all the investments are still owned at the end of year three. Now, importantly, we've been given some information below that tells us about the classification of those financial assets and also their market values throughout years one to three. So just to highlight that the derivatives are classified as held for trading, as we'd expect, the equities are classified as available for sale, and the bonds are classified as held to maturity. So let's use that information to calculate the investment income in each year throughout years one to three. Now, starting off with the held for trading items, that's the derivatives, we care about the market values of those each year 'cause the changes in those market values are what's recorded in the investment income and expense. So let's take the market value for year one and deduct the purchase price of 200, and that gives us an investment expense of 20 that's gonna be included in the earnings for year one. Then we can roll that forward for years two and three, and you can see the investment income and expense for each year there for the derivatives. Now the available for sale equities. Now, remember that for available for sale items, we care about the market value of those in the balance sheet, but the changes in those market values get recorded in equity, not in earnings. It's only realized gains and losses which go in earnings, and that would be either if they're sold or if there were dividends, for example, on these equities, that would also be included here. Now, we've not been given any information on that, so we're just gonna assume the investment income on those is nil in each year.

Now finally, the held to maturity bonds. Now, remember that for health to maturity items, we don't care at all about market values because these are held right until redemption,

that's accruing during that time. And we've been told that these are 5% coupon bonds. So we're gonna take the purchase price, which is also the par value of 200, and we're gonna multiply that by 5% to give our annual coupon of 10, and that's gonna be received throughout years one to three. Now that we've calculated all of those, we can just sum those together, and that'll give us the total investment income and expense in each year throughout years one to three. And that's what will be included in investment returns for the insurance company for each year.