Final Exam Anwer of Finance Essay

2800 Words Nov 26th, 2012 12 Pages
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TO BE RETURNED AT THE END OF THE EXAMINATION.

THIS PAPER MUST NOT BE REMOVED FROM THE EXAM CENTRE.

SURNAME:____________________________________

FIRST NAME:____________________________________

STUDENT NO:____________________________________

COURSE:____________________________________

25556 The Financial System

Special exam, spring semester, 2011

Time Allowed: 3 hours plus 10 minutes reading time.

Exam day and date:

1. Exam Paper: • Please ensure that your name and student number are at the top of this page. • There are three parts to this exam: Part A, Part B and Part C. All questions are compulsory. • This paper will be
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12. Our study of the futures and FRA markets revealed that

a) FRAs establish forward rates whereas futures establish future spot rates;

b) futures contracts can be closed out only on their contract date;

c) the settlement date in a 1:4 FRA is in four months;

d) a 2:5 FRA in April provides the same hedge as a 90-day BAB futures contract;

e) FRAs are a standardised contract with a face value of $1 million.

13. Our study of Australia’s foreign exchange market revealed

a) the AUD must be purchased in Australia;

b) the RBA does not conduct trades in the AUD because the currency has been floated;

c) purchases of EUR in Australia can be paid for with USD;

d) the RBA trades in the market to keep the exchange rate in line with its target rate;

e) both (a) and (c) are correct.

14. Identify the most correct statement concerning share valuation

a) fundamental analysts assume the share market is semi-strong efficient;

b) technical analysts assume markets are weak form efficient;

c) a high price-earnings ratio indicates investors expect the firm’s earnings will increase;

d) the estimation of the price of preference shares requires a dividend growth model;

e) both (a) and (b) are correct.

15. It is clear from our study of the Australian share market that

a) The order book records at-market orders that have not resulted in a trade;

b) trading

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