Question 2 (25 marks) Part A A company issues 90-day bank bills with a face value of $5,000,000. The bank acting as acceptor charges a fee of 90 basis points. The BBSW (Bank Bill Swap Rate) at the time of issue is 4.3% a) A fund manager purchases the bills in the primary market. How much do they pay? (5 marks) b) How much does the company receive? [5 marks) c) What is the acceptance fee (i.e. calculate the fee earned by the acceptor)? [3 marks] Note: Show all your workings for each part. I Part B (a) Suppose that the 90-day yield BBSW (Bank Bill Swap Rate) just dropped from 4.5% p.a. to 3.30% p.a. What does this imply for (1) prospective investors and (ii) investors holding money market securities? (Maximum: 150 words) [5 marks] (b) Suppose you expect that short-term yields are about to fall. Suggest an investment strategy that would profit from this expectation. (Maximum: 200 words) [7 marks) Note: Clear, logical and succinct writing showing creativity and real understanding will be rewarded. Question 2 (25 marks) Part A A company issues 90-day bank bills with a face value of $5,000,000. The bank acting as acceptor charges a fee of 90 basis points. The BBSW (Bank Bill Swap Rate) at the time of issue is 4.3% a) A fund manager purchases the bills in the primary market. How much do they pay? (5 marks) b) How much does the company receive? [5 marks) c) What is the acceptance fee (i.e. calculate the fee earned by the acceptor)? [3 marks] Note: Show all your workings for each part. I Part B (a) Suppose that the 90-day yield BBSW (Bank Bill Swap Rate) just dropped from 4.5% p.a. to 3.30% p.a. What does this imply for (1) prospective investors and (ii) investors holding money market securities? (Maximum: 150 words) [5 marks] (b) Suppose you expect that short-term yields are about to fall. Suggest an investment strategy that would profit from this expectation. (Maximum: 200 words) [7 marks) Note: Clear, logical and succinct writing showing creativity and real understanding will be rewarded