QUESTION ONE

a. Discuss the 3 different views on how dividend policy affects stock prices.

b. List and define 2 types of Financial Markets. [2 marks] c. What factors affect security expected return?

d. There are two types of Options, explain their differences.

e. What is the name given for the most common way in which professional dealers and brokers state foreign exchange quotations in the interbank market? What is the alternative name?

f. Briefly explain Premium and Discount bonds.

g. A company has a bond issued at par K1, 000 and 2 years after being issued the bond is being sold for K1, 200.The coupon rate on the bonds is 10% and had a maturity of 10 years. Find the YTM?