CIMA Exam CIMAPRA17-BA1-1 Topic 2 Question 100 Discussion

Actual exam question for CIMA's CIMAPRA17-BA1-1 exam

Question #: 100
Topic #: 2

A government issues a security which promises to pay $100 per year indefinitely. What is it worth if the required rate of return is..

A$2, 400

B$1, 400

C$2, 500

D$4, 000

Show Suggested Answer

Suggested Answer: C

by Shonda at Sep 14, 2024, 08:50 PM

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Isadora

4 months ago

I agree with Craig, $1,400 makes sense based on the required rate of return.

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Craig

4 months ago

I believe it's $1,400 because that's the present value of the cash flows.

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Mertie

5 months ago

I think it's worth $2,500.

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Cassie

5 months ago

Hmm, I'm not sure about this one. Maybe the answer is a trick question and the government actually owes us $1 million per year? Just kidding, but it's always good to double-check these things.

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Haydee

4 months ago

I'm not sure, but I think it might be C) $2,500 because it seems like a reasonable value.

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Dean

4 months ago

C) $2,500

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Kelvin

4 months ago

I think it's A) $2,400 because that's the present value of the perpetuity formula.

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Yvonne

5 months ago

A) $2,400

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Ranee

5 months ago

D) $4,000 seems a bit high. I'm going to go with B) $1,400 - that's the present value of a perpetuity with a 7% discount rate.

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Kate

5 months ago

I think the answer is C) $2,500. That's the present value of a perpetual annuity with a $100 annual payment and a 4% discount rate.

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Jeniffer

5 months ago

I think it's D) $4,000.

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Jeniffer

5 months ago

I agree, the answer is C) $2,500.

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