You Are Considering an Investment in a 40-Year Security

question 44

Multiple Choice

You are considering an investment in a 40-year security.The security will pay R25 a year at the end of each of the first three years.The security will then pay R30 a year at the end of each of the next 20 years.The simple interest rate is assumed to be 8 percent, and the current price (present value) of the security is R360.39.Given this information, what is the equal annual payment to be received from Year 24 through Year 40 (i.e., for 17 years) ?

• A) R35
• B) R38
• C) R40
• D) R45
• E) R50

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Definitions:

Government

The organization or system through which a community or society exercises authority and performs functions.

Inefficiency

A situation where resources are not used in the best possible way, often leading to wasted potential.

Monopoly

An economic setup where there is only one provider of a good or service, possessing total market control due to the lack of any similar alternatives.

Deadweight Loss

An economic inefficiency arising when there's a failure to attain the free market equilibrium for any product or service.