Q1: You arrange a mortgage from the Pinder Bank of Australia. The amount you borrow is$760,000 with payments required on a monthly basis over the next 25 years with thefirst payment required one month from today. The interest rate quoted by the bank is10% p.a.compounding monthly. Which of the following is closest to the monthlypayment required by the bank? a. $6,088 b. $7,057 c. $6,906 d. Need more information to answer the question e. $8,005

Q2: You are employed by an investment bank to estimate the value of a coupon-paying bondwith the following features. It has a face value of $100,000, pays quarterly coupons at arate of 10% p.a.and the market required yield to maturity is 8% p.a.compounding quarterly. There is one full quarter until the next payment will be received and the bondmatures in 3 years. Which of the following is closest to the market value of the bond? a. $94,871 b. $106,789 c. $93,473 d. Need more information to answer the question e. $105,288

Q3: Which of the following statements correctly describes the nature of indirect financing asdiscussed in lectures? a. lt relies upon an intermediary to facilitate the flow of funds from surplus to deficit units, unlike direct financing b.It is the source of financing whenever an investor purchases shares that are listed on the Australian Securities Exchange. c. None of the other answers is correct d. More than one of the other answers is correct e. May involve an individual investor buying shares in a company when a company goes public via an initial public offering.

Q4: Which of the following statements correctly describes aspects of simple interest asdiscussed in lectures? a. None of the other statements are correct b. More than one of the other statements are correct c. By convention, simple interest is the main method used for the pricing of long-term bonds. d. With simple interest, the future value of any cash flow is simply its current value discounted back at a rate of r% per period for n periods. e. A loan that has been created that pays simple interest,will involve interest payments that are calculated on the basis of both the principal amount borrowed as well as any interest that has accumulated to date.

Q5: Which of the following statements correctly describes the relationship between a long-term bond's market value, its coupon rate and the relevant yield to maturity? a. More than one of the other statements are correct b. When bonds are initially issued, the coupon rate is generally set equal to the required yield tomaturity so that the company can issue the bonds at their face value. c. None of the other statements are correct d. Agovernment bond with a fixed coupon rate will always be worth the same amount at any stage in its life because the cash flows are effectively riskless. e. If at any point in the bond's life its coupon rate is less than the market determined yield to maturity, its market value at that time will be less than the face value of the bond.