Question 11

1. Explain why a trade bill may be used to facilitate short term international trade finance. Illustrate your answer with an example.

(5 marks)

2. Explain the terms:

1. Bond equivalent yield

(2 marks)

2. Discount yield

(2 marks)

3. A dealer purchases a US 3-month (92 day) Treasury bill with a face value of $900,000 for $892,500. Calculate to 2 decimal places:

1. the discount yield; and

(3 marks)

2. the bond equivalent yield.

(3 marks)

4. XYZ Company PLC suddenly loses its A+ credit rating and is downgraded to BBB. Discuss the effects this would have on its ability to access funds in the money markets.

(5 marks)

Question 11

1. Explain why a trade bill may be used to facilitate short term international trade finance. Illustrate your answer with an example.

(5 marks)

2. Explain the terms:

1. Bond equivalent yield

(2 marks)

2. Discount yield

(2 marks)

3. A dealer purchases a US 3-month (92 day) Treasury bill with a face value of $900,000 for $892,500. Calculate to 2 decimal places:

1. the discount yield; and

(3 marks)

2. the bond equivalent yield.

(3 marks)

4. XYZ Company PLC suddenly loses its A+ credit rating and is downgraded to BBB. Discuss the effects this would have on its ability to access funds in the money markets.

(5 marks)