Question 1

Provided the return on a security is 5% p.a.and the inflation rate is 3.5%,what is the real rate of return on this security per year?

Accepted Answer

A)  $ 2.33 \% $ 
B)  $ 1.44 \% $ 
C)  $ -0.97 \% $ 
D)  $ -2.33 \% $ 
A)  $ 2.33 \% $ 
B)  $ 1.44 \% $ 
C)  $ -0.97 \% $ 
D)  $ -2.33 \% $

Question 2

A bank-accepted bill with a face value of $100 000 currently has 30 days to expiry.If the current price of the bank-accepted bill is $93 809,what is the implied annual yield?

Accepted Answer

A)  $ 6.8 \% $ 
B)  $ 7.0 \% $ 
C)  $ 7.5 \% $ 
D)  $ 8.0 \% $ 
A)  $ 6.8 \% $ 
B)  $ 7.0 \% $ 
C)  $ 7.5 \% $ 
D)  $ 8.0 \% $

Question 3

Say the current one-month interest rate is 3.75%.Further,the three-month rate is 6.25%.According to the expectation theory,what is the predicted rate for the coming two-month period?

Accepted Answer

A)  $ 7.23 \% $ 
B)  $ 6.74 \% $ 
C)  $ 7.47 \% $ 
D)  $ 7.48 \% $ 
A)  $ 7.23 \% $ 
B)  $ 6.74 \% $ 
C)  $ 7.47 \% $ 
D)  $ 7.48 \% $

Question 4

Assume that the current yield for a 90-day $100 000 bill is 6.5%.This yield is expected to decrease to 5%.If an investor traded on this information,what would be the profit on this information trading?

Accepted Answer

A)  $ \$ 280.78 $ 
B)  $ \$ 325.26 $ 
C)  $ \$ 359.60 $ 
D)  $ \$ 412.07 $ 
A)  $ \$ 280.78 $ 
B)  $ \$ 325.26 $ 
C)  $ \$ 359.60 $ 
D)  $ \$ 412.07 $

Question 5

The yield curve plots the relationship between time to maturity and yield.

Accepted Answer

A) True 
 B)False

Question 6

Default risk is not important for money market securities.

Accepted Answer

A) True 
 B)False

Question 7

As an inquisitive student of finance,you were sceptical when your lecturer told you that the price changes of bills could be accurately measured using the elasticity approach.Assuming a $100 000 face value 180-day bill with 45 days to maturity,calculate the pricing error from using the elasticity approach if the yield changes from 7% to 8.5% p.a.

Accepted Answer

A)  $ -\$ 0.40 $ 
B)  $  \$ 0.28 $ 
C)  $ -\$ 0.16 $ 
D)  $ -\$ 0.28 $ 
A)  $ -\$ 0.40 $ 
B)  $  \$ 0.28 $ 
C)  $ -\$ 0.16 $ 
D)  $ -\$ 0.28 $

Question 8

Those who trade in the money market can deal only in cash.

Accepted Answer

A) True 
 B)False

Question 9

In Australia, is used to calculate interest.

Accepted Answer

A)  Simple interest formula 
B)  Compound interest formula 
C)  Both simple and compound 
D)  None of these answers 
A)  Simple interest formula 
B)  Compound interest formula 
C)  Both simple and compound 
D)  None of these answers

Question 10

Using the elasticity approach,estimate the change in the price of a $500 000 90-day bank-accepted bill when the yield increases from 5% to 6%.

Accepted Answer

A)  $ \$ 240.53 $ 
B)  $ \$ 252.18 $ 
C)  $ \$ 260.12 $ 
D)  $ \$ 265.70 $ 
A)  $ \$ 240.53 $ 
B)  $ \$ 252.18 $ 
C)  $ \$ 260.12 $ 
D)  $ \$ 265.70 $

Question 11

What would be the maturity price of a promissory note with a term of 90 days,interest rate of 5.7% and a face value of $100 000?

Accepted Answer

A)  $ \$ 94 \quad 607 $ 
B)  $ \$ 98 \quad 595 $ 
C)  $ \$ 98 \quad 614 $ 
D)  $ \$ 99 \quad 021 $ 
A)  $ \$ 94 \quad 607 $ 
B)  $ \$ 98 \quad 595 $ 
C)  $ \$ 98 \quad 614 $ 
D)  $ \$ 99 \quad 021 $

Question 12

The yield of a $50,000 45 day bill is currently 5%.If over the next 15 days the yield changes to 6%,the change in price will have both a time component and a yield component.What is the size of the yield component expressed in dollars?

Accepted Answer

A)  $ -60.97 $ 
B)  $ 49.01 $ 
C)  $ 49.07 $ 
D)  $ 101.96 $ 
A)  $ -60.97 $ 
B)  $ 49.01 $ 
C)  $ 49.07 $ 
D)  $ 101.96 $

Question 13

The yield of a $100 000 180-day bill decreases from 6% to 7%.What is the effect on the price of the bill?

Accepted Answer

A)  $ -\$ 463.00 $ 
B)  $ -\$ 426.22 $ 
C)  $ \$ 463.00 $ 
D)  $ \$ 481.50 $ 
A)  $ -\$ 463.00 $ 
B)  $ -\$ 426.22 $ 
C)  $ \$ 463.00 $ 
D)  $ \$ 481.50 $

Question 14

For a market security,if the yield curve and time to maturity is known:

Accepted Answer

A)  an investor can calculate securities prices and interest rates 
B)  an investor can identify securities prices and time to maturity 
C)  the security yield can be read from an appropriate yield curve 
D)  an investor can identify when to buy and sell securities 
A)  an investor can calculate securities prices and interest rates 
B)  an investor can identify securities prices and time to maturity 
C)  the security yield can be read from an appropriate yield curve 
D)  an investor can identify when to buy and sell securities

Question 15

The expectations theory implies that short-term yields are a function of the current interest rates and the expected future interest rates.

Accepted Answer

A) True 
 B)False

Question 16

Using the elasticity approach,estimate the new price of a $100 000 90-day bank-accepted bill when the yield decreases from 9% to 7% p.a.

Accepted Answer

A)  $ \$ 97  \quad 565.32 $ 
B)  $ \$ 98  \quad 565.32 $ 
C)  $ \$ 98  \quad 537.08 $ 
D)  $ \$ 97  \quad 357.08 $ 
A)  $ \$ 97  \quad 565.32 $ 
B)  $ \$ 98  \quad 565.32 $ 
C)  $ \$ 98  \quad 537.08 $ 
D)  $ \$ 97  \quad 357.08 $

Question 17

A $500 000 180-day note is purchased with a yield of 8% and sold 90 days later with a yield of 6%.Calculate the discrete holding period return for this note expressed as an annual nominal return.

Accepted Answer

A)  $ -9.81 \% $ 
B)  $ -9.73 \% $ 
C)  $ 9.73 \% $ 
D)  $ 9.81 \% $ 
A)  $ -9.81 \% $ 
B)  $ -9.73 \% $ 
C)  $ 9.73 \% $ 
D)  $ 9.81 \% $

Question 18

Suppose the expected one-month rates of return are 3% p.a. ,4.5% p.a.and 7% p.a.for the month ending in one,two and three months' time respectively.Further,it is found that the liquidity premium for the second and third month is 1.75% and 2.40% respectively.According to the liquidity premium theory,what is the three-month yield?

Accepted Answer

A)  $ 3.91 \% $ 
B)  $ 4.27 \% $ 
C)  $ 4.79 \% $ 
D)  $ 6.25 \% $ 
A)  $ 3.91 \% $ 
B)  $ 4.27 \% $ 
C)  $ 4.79 \% $ 
D)  $ 6.25 \% $

Question 19

Assume that the current yield for a 90-day $100 000 bill is 7.0%.This yield is expected to decrease to 6.15%.If an investor traded on this information,what would be the profit on this information trading?

Accepted Answer

A)  $ \$ 352.24 $ 
B)  $ \$ 295.77 $ 
C)  $ \$ 202.96 $ 
D)  $ \$ 295.28 $ 
A)  $ \$ 352.24 $ 
B)  $ \$ 295.77 $ 
C)  $ \$ 202.96 $ 
D)  $ \$ 295.28 $

Question 20

The elasticity of commercial bill changes in the yield is the time to maturity.

Accepted Answer

A) True 
 B)False

Provided the return on a security is 5% p.a.and the inflation rate is 3.5%,what is the real rate of return on this security per year?

A bank-accepted bill with a face value of $100 000 currently has 30 days to expiry.If the current price of the bank-accepted bill is $93 809,what is the implied annual yield?

Say the current one-month interest rate is 3.75%.Further,the three-month rate is 6.25%.According to the expectation theory,what is the predicted rate for the coming two-month period?

Assume that the current yield for a 90-day $100 000 bill is 6.5%.This yield is expected to decrease to 5%.If an investor traded on this information,what would be the profit on this information trading?

The yield curve plots the relationship between time to maturity and yield.

Default risk is not important for money market securities.

Those who trade in the money market can deal only in cash.

In Australia, is used to calculate interest.

Using the elasticity approach,estimate the change in the price of a $500 000 90-day bank-accepted bill when the yield increases from 5% to 6%.

What would be the maturity price of a promissory note with a term of 90 days,interest rate of 5.7% and a face value of $100 000?

The yield of a $50,000 45 day bill is currently 5%.If over the next 15 days the yield changes to 6%,the change in price will have both a time component and a yield component.What is the size of the yield component expressed in dollars?

The yield of a $100 000 180-day bill decreases from 6% to 7%.What is the effect on the price of the bill?

For a market security,if the yield curve and time to maturity is known:

The expectations theory implies that short-term yields are a function of the current interest rates and the expected future interest rates.

Using the elasticity approach,estimate the new price of a $100 000 90-day bank-accepted bill when the yield decreases from 9% to 7% p.a.

A $500 000 180-day note is purchased with a yield of 8% and sold 90 days later with a yield of 6%.Calculate the discrete holding period return for this note expressed as an annual nominal return.

Assume that the current yield for a 90-day $100 000 bill is 7.0%.This yield is expected to decrease to 6.15%.If an investor traded on this information,what would be the profit on this information trading?

The elasticity of commercial bill changes in the yield is the time to maturity.

The Investment Decision

Australian Financial Markets

The International Investment Environment

Financial Management: Derivative Instruments and Information Sources

Bonds

Investor Preferences and Portfolio Concepts

Risky Asset Pricing Models and the Capm

Alternative Risky Asset Pricing Models

Concepts and Applications of Market Efficiency

Equity Valuation Models

Macro- and Industry Analysis of Share Markets

Qualitative Stock Selection

Quantitative Company Analysis

Futures and Forward Contracts

Option Contracts

Advanced Issues in Options

Alternative Investments

Portfolio Management

Performance Evaluation of Managed Funds

Filters

Exam 5: Money Market Securities

Provided the return on a security is 5% p.a.and the inflation rate is 3.5%,what is the real rate of return on this security per year?

A bank-accepted bill with a face value of $100 000 currently has 30 days to expiry.If the current price of the bank-accepted bill is $93 809,what is the implied annual yield?

Say the current one-month interest rate is 3.75%.Further,the three-month rate is 6.25%.According to the expectation theory,what is the predicted rate for the coming two-month period?

Assume that the current yield for a 90-day $100 000 bill is 6.5%.This yield is expected to decrease to 5%.If an investor traded on this information,what would be the profit on this information trading?

The yield curve plots the relationship between time to maturity and yield.

Default risk is not important for money market securities.

Those who trade in the money market can deal only in cash.

In Australia, is used to calculate interest.

Using the elasticity approach,estimate the change in the price of a $500 000 90-day bank-accepted bill when the yield increases from 5% to 6%.

What would be the maturity price of a promissory note with a term of 90 days,interest rate of 5.7% and a face value of $100 000?

The yield of a $50,000 45 day bill is currently 5%.If over the next 15 days the yield changes to 6%,the change in price will have both a time component and a yield component.What is the size of the yield component expressed in dollars?

The yield of a $100 000 180-day bill decreases from 6% to 7%.What is the effect on the price of the bill?

For a market security,if the yield curve and time to maturity is known:

The expectations theory implies that short-term yields are a function of the current interest rates and the expected future interest rates.

Using the elasticity approach,estimate the new price of a $100 000 90-day bank-accepted bill when the yield decreases from 9% to 7% p.a.

A $500 000 180-day note is purchased with a yield of 8% and sold 90 days later with a yield of 6%.Calculate the discrete holding period return for this note expressed as an annual nominal return.

Assume that the current yield for a 90-day $100 000 bill is 7.0%.This yield is expected to decrease to 6.15%.If an investor traded on this information,what would be the profit on this information trading?

The elasticity of commercial bill changes in the yield is the time to maturity.

The Investment Decision

Australian Financial Markets

The International Investment Environment

Financial Management: Derivative Instruments and Information Sources

Bonds

Investor Preferences and Portfolio Concepts

Risky Asset Pricing Models and the Capm

Alternative Risky Asset Pricing Models

Concepts and Applications of Market Efficiency

Equity Valuation Models

Macro- and Industry Analysis of Share Markets

Qualitative Stock Selection

Quantitative Company Analysis

Futures and Forward Contracts

Option Contracts

Advanced Issues in Options

Alternative Investments

Portfolio Management

Performance Evaluation of Managed Funds

Filters