Assume That You Will Receive R2,000 a Year in Years

question 5

Multiple Choice

Assume that you will receive R2,000 a year in Years 1 through 5, R3,000 a year in Years 6 through 8, and R4,000 in Year 9, with all cash flows to be received at the end of the year.If you require a 14 percent rate of return, what is the present value of these cash flows?

• A) R9,851
• B) R13,250
• C) R11,714
• D) R15,129
• E) R17,353

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Definitions:

Semiannual Interest Payment

A finance term referring to the practice of making interest payments twice a year on a loan or bond.

Bonds

Debt instruments signifying an investment made by an investor in the form of a loan to either a corporation or a government entity.

Journal Entries

Records of financial transactions in the books of accounts, acting as the primary source for all accounting processes.

Available-for-Sale Securities

Financial assets that are not classified as held-to-maturity or trading securities, and can be sold in the short-term.