Sample exam questions 2023/24 Q1 i. ii. iii. Q.2 i. ii. iii. Q.3 i. ii. iii....

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Sample exam questions 2023/24 Q1 i. ii. iii. Q.2 i. ii. iii. Q.3 i. ii. iii. Q.4 40 i. ii. iii. Briefly explain the distinction between private and public financial markets for investors and firms. Briefly explain three key functions of specific financial market/instruments (such as bonds, equities, derivatives). Distinguish between the primary market and the secondary market for equities and/or bonds, in terms of their functions. Explain the basic logic of discounting future cash flows, distinguishing between the discount rate and the discount factor. Explain how a (constant) discount rate may be used to generate varying discount factors for cash flows arising at different points in time. Briefly explain the likely impact of falling interest rates on asset prices generally. Explain the basic features of a typical bond instrument. Give a short account of the key participants in the public bond market. Explain the method you would use to arrive at a price for the following government bond: it has a coupon of 4% payable annually, has a term to maturity of 3 years, and currently yields 2.5%. Distinguish between the current yield and the yield to maturity as indicators of bond returns. Briefly explain how yield spreads are useful indicators of credit market conditions. Why might an inverted yield curve arise? Sample exam questions 2023/24 Q1 i. ii. iii. Q.2 i. ii. iii. Q.3 i. ii. iii. Q.4 40 i. ii. iii. Briefly explain the distinction between private and public financial markets for investors and firms. Briefly explain three key functions of specific financial market/instruments (such as bonds, equities, derivatives). Distinguish between the primary market and the secondary market for equities and/or bonds, in terms of their functions. Explain the basic logic of discounting future cash flows, distinguishing between the discount rate and the discount factor. Explain how a (constant) discount rate may be used to generate varying discount factors for cash flows arising at different points in time. Briefly explain the likely impact of falling interest rates on asset prices generally. Explain the basic features of a typical bond instrument. Give a short account of the key participants in the public bond market. Explain the method you would use to arrive at a price for the following government bond: it has a coupon of 4% payable annually, has a term to maturity of 3 years, and currently yields 2.5%. Distinguish between the current yield and the yield to maturity as indicators of bond returns. Briefly explain how yield spreads are useful indicators of credit market conditions. Why might an inverted yield curve arise?