Question 2 a. The following table of London money rates shows the relationship between maturity and...

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Question 2 a. The following table of London money rates shows the relationship between maturity and interest rates for four types of short term investment, as published in the financial press: GBP certificates of deposit Local authority bonds 1 month 1.87 ● 1.87 Finance house deposits Treasury bills (buy) 1.68 Required: Explain: 2 3 months 2.06 2 2.12 1.75 6 months 2.18 2.25 2.37 One Year 2.31 2.5 2.56 The nature of the instruments listed The main reasons for the differences in interest rate between the instruments over time b. Describe the likely implications to a typical company of lower interest rates c. If you were the finance director of a company with a large investment program and no capital gearing explain what changes might result to both the investment program and its financing as a result of falling interest rates. Question 2 a. The following table of London money rates shows the relationship between maturity and interest rates for four types of short term investment, as published in the financial press: GBP certificates of deposit Local authority bonds 1 month 1.87 ● 1.87 Finance house deposits Treasury bills (buy) 1.68 Required: Explain: 2 3 months 2.06 2 2.12 1.75 6 months 2.18 2.25 2.37 One Year 2.31 2.5 2.56 The nature of the instruments listed The main reasons for the differences in interest rate between the instruments over time b. Describe the likely implications to a typical company of lower interest rates c. If you were the finance director of a company with a large investment program and no capital gearing explain what changes might result to both the investment program and its financing as a result of falling interest rates.

Answer rating: 100% (QA)

a The instruments listed in the table are various types of shortterm investments 1 GBP Certificates of Deposit These are time deposits issued by banks and financial institutions in the United Kingdom ... View the full answer