QUESTION $1[10$ MARKS$]$

Using examples, differentiate between investment and financing decisions and explain the factors affecting each decision.

QUESTION $2[10$ MARKS$]$

A friend at university notes that you are studying Finance and Investment Management. He asks why $($FNB$)$ the First

National Bank was trading at a share price of R$47\mathrm{.}33$ and $($STD$)$ Standard Bank R$206\mathrm{.}50$ He would like to know if this

means that STD is much more valuable than FNB$.$

Describe Market Capitalisation of companies and why it matters giving an example of the two companies above $.$ Which

company has a greater equity value?

QUESTION $3[10$ MARKS$]$

Warren Buffet described derivatives as weapons of mass destruction. However according to your lectures you note that if

derivatives are used for hedging purposes you can actually reduce risk.

Describe and explain any two techniques for hedging.