Question 1 a) Why is the value of a long-term bond more sensitive to a change in interest rates than that of a short-term bond? (3 marks) b) Billabong International Ltd issued a 5-year bond 1 year ago with a coupon of 8 per cent and a face value of $1000. The bond pays interest semi-annually. If the yield to maturity on this bond is 9 per cent, what is the price of the bond? (4 marks) c) A Private University costs $400,000 when your child enters university in 15 years. You presently have $80,000 to invest. What annual rate of interest must you earn on your investment to cover the cost of your child's university education? (3 marks) Question 2 a. Identify and describe two key functions of a finance manager. (4 marks) b. Historically share markets have provided better returns to investors compared to bond markets. Explain why i. Share markets in general offer higher returns to investors when compared with bonds. (3 marks) ii. Despite that, some investors still prefer to invest in bonds rather than shares. (3 marks) Question 3 a) Brian Enterprises has a 7-year loan of $23 500 with Bankwest. It plans to repay the loan in 7 equal instalments starting today. If the rate of interest is 8.4 per cent per annum, how much will each payment be worth? (4 marks) b) David bought a BMW for a price of $17 345. He deposited $6000 and financed the rest through the dealer at an APR of 9.3 per cent for 4 years. What is the effective annual rate (EAR) if payments are made monthly? (4 marks)