INV2601 Assessment 1 Semester 2 2022

Question 1
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Question text
Assume the South African economy is experiencing a decline in its economic growth, an
increase in inflation, and a decrease in consumption. The South African Reserve Bank
(SARB) intends to rectify the country’s current economic situation. It would implement
the monetary policy tools by …




a.
purchasing additional government securities, raising reserve requirements and lowering
the repo rate.




b.
selling previously bought government securities, reducing reserve requirements and
increasing the repo rate.




c.
purchasing additional government securities, reducing reserve requirements and
lowering the repo rate.




d.
selling previously bought government securities, raising reserve requirements, and
increasing the repo rate.



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Your answer is correct.
The correct answer is:

, purchasing additional government securities, reducing reserve requirements and
lowering the repo rate.

Question 2
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Question text
A company just paid dividends of R2.00 per share. Assume that the dividends will grow
by 20% per year during the next two years. After that, growth is expected to level off to a
constant growth rate of 10% per year. The required rate of return is 12%. Calculate the
share’s intrinsic value using the two-stage dividend growth model.




a.
R126.28




b.
R130.71




c.
R131.56




d.
R158.40



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Your answer is correct.
The correct answer is:
R130.71