Question 7

(a) Explain what is meant by corporate governance. In September 2014, Alibaba listed on the New York Stock Exchange in what was, at the time, the largest IPO in history. Explain some of the reasons that Alibaba chose to list in the US instead of China or Hong Kong and link your discussion back to your understanding of International Corporate Governance.

(b)In bond markets, explain what is meant by the Term Structure of Interest Rates. Explain under what circumstances there would be a downward sloping term structure. Sketch a graph to support your answer.

(c) An ordinary bond of AGL Corporation has an annual coupon rate of 8% and a face value of $1,000. The bond has 9 years to maturity. Coupons are paid semi-annually and the current yield to maturity is 9%. Your broker calls and offers to sell you one of these bonds for $940. Should you accept this offer? Explain why or why not. What is the effective annual yield on this bond?