Question 01:

a) Name and briefly explain three different types of debt security.

b) If BHP is issuing $1,000,000,000 worth of $10,000 face value 10% coupon bonds at par value, what is the price of each bond on the issue date?

Question 02:

a) What caused the Global Financial Crisis?

b) Why was the impact of Global Financial Crisis minimal on Australia?

Question 03:

The following information has been determined for Ace Engineering Ltd.

• The correlation coefficient of the returns of the security with that of the market is 0.6
• The standard deviation of return of Ace Engineering share is 6%.
• The standard deviation of return on the market portfolio is 4%.
• The risk free rate of return is 6%.
• Expected return on market is 15%.

Required:

a) Calculate the Beta coefficient for Ace Engineering.

b) What is the expected rate of return on Ace Engineering shares?

c) Is Ace Engineering a risky security? Why?