Velvet Limited purchased debentures on 1 April 2020. The debentures had the following terms:

12 000 debentures with a face value of R150 each.

The debentures are redeemable in 10 years.

An annual rate of 7% is applicable, and interest is payable annually on 31 March.

Payment for the debentures amounts to their present value. Assume an effective interest rate of 7.40%.

Velvet Limited's business model is to hold the debentures to collect contractual cash flows and that the cash flows are solely payments of principal and interest on the principal amount.