25.Describe the impact of credit ratings on bond yields and prices.

(2 Points)

 

 

 

26.Explain why equity securities rarely trade at book value.

(2 Points)

 

 

 

27.Explain what are economic indicators and why they are important for markets. Given an example of an economic indicator and explain what would be the result of a big change in the indicator.

(3 Points)

 

 

 

28.A company's intrinsic value is calculated at $50. The required rate of return if 7% and the growth rate is 3%. What is the expected dividend next year?

(2 Points)

 

 

 

29.A 2 year $1000 bond pays 6% interest in monthly payments. The current two year market rate is 4%. Calculate the price

(2 Points)

 

 

 

30.A 1000 par value 2 year bond is priced at $1,050 and pays an annual dividend of 6%. Calculate the market yield.

(2 Points)

 

 

 

31.ABC Company has a price of $30 while the industry ETF has a price of 90. Earnings per share is $3 and $10 respectively. Assume ABC growth is in line with its industry peers. Comment on the pricing/value of ABC.

(2 Points)

 

 

 

32.Assume that a preference share with a face value of 10 pays a 6% dividend annually. An investor required a 9% return for preference shares to compensate for the higher risk. Calculate the expected value of the preference shares.

(2 Points)

 

 

 

33.Explain how preference shareholders are protected despite a company's ability to skip payments.

(2 Points)

 

 

 

34.An economist advises The Bahamas to devalue its currency because it will attract more tourists and make it cheaper and overall provide a net benefit. In no more than 2 paragraphs, explain whether you agree or disagree and why.

Answer rating: 100% (QA)

Credit ratings have a significant impact on bond yields and prices A higher credit rating indicates lower credit risk leading to lower bond yields and higher bond prices This is because investors perc... View the full answer