QUESTION FOUR [30]
4.1 How much must be invested now at 10% interest compounded semi- annually to
have R80 000 in 9 years? (5)
4.2 Joshua deposits R3000 every six months into an investment account that pays an
annual interest rate of 5%, compounded semi-annually. How much will Joshua
have in his account at the end of four years? (5)
4.3 Suppose that an amount of R15 000 grows to R17 859 in seven years with interest
compounded quarterly. What annual rate of interest has been used? (5)
4.4 Jemimah has a portfolio containing two assets A and B. Asset A will represent 45% of the
rand value of her portfolio, and asset B will account for other 55%. The expected return
overthe next five years for each of these assets is given below:
Expected return
Year Asset A Asset B
2017 12% 18%
2018 18% 9%
2019 14% 12%
2020 12% 17%
2021 15% 10%
Calculate the expected portfolio return, E(Rp) for each of the 5 years. (6)
4.5 SAFARINET stock has an expected ROE of 10% per year, expected earnings per
share of R5 and expected dividends of R4 per share. The required rate of return is
12%. Calculate the:
4.5.1 expected growth rate for SAFARINET. (4)
4.5.2 intrinsic value of SAFARINET’s stock.
