MU - S1 2004 - Equity Markets

MU - S1 2004 - Equity Markets - MONASH UNIVERSITY LIBRARY...

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Unformatted text preview: MONASH UNIVERSITY LIBRARY "fl" HHHHIHHIH ;~,;;_...1.53‘,3\Q. 004094784 SESTIU- ‘ OFFICE USE ONLY Monash University Semester One Examinations 2004 Faculty of Business and Economics Department of Accounting and Finance EXAM CODES: AFF2701 TITLE OF PAPER: EQUITY MARKETS EXAM DURATION: 3 Hours READING TIME: 10 Minutes THIS PAPER IS FOR STUDENTS STUDYING AT: (twice use only — tick where applicable) Berwick El Clayton E3 Peninsula El Distance Education |'_'l Open Learning El Caulfield Gippsland El Sunway E] Enhancement Studies El Other (specify) El Candidates are reminded that they should have no material on their desks unless their use has been specifically permitted by the following instructions. AUTHORISED MATERIALS CALCULATORS YES NO CI OPEN BOOK . YES El NO SPECIFICALLY PERMITTED ITEMS YES D N0 if yes, items permitted are: This paper consists of Seven (7) questions printed on Five (5) pages. Answer ALL questions. The total number of marks available in the exam is 70. PLEASE CHECK BEFORE COMIVIENCING. This is a FINAL paper. THIS PAPER MUST NOT BE REMOVED FROM THE EXAMINATION ROOM. AFF2701_le Page 1 of5 OFFICE USE ONLY BE. AFF2701 EQUITY MARKETS This page has been left blank AFF2701_le Page 2 of 5 OFFICE USE ONLY CC}: Answer Question One in your answer booklet by listing the question number, the relevant part of the question (a - i) and the answer (i - iv). Select the response that you feel best answers the question posed. . AFF2701 EQUITY MARKETS Question One (a) A Rights Issue of shares will: i) increase the value of total assets. ii) increase the value of owner’s equity. iii) increase the value of issued shares. iv) all of the above. (b) A purchase of shares through the Australian Stock Exchange would constitute an example of: i) an over-the—counter transaction. ii) a direct financial transaction. 7 iii) a secondary market transaction. iv) a primary market transaction. (c) Which of the following securities may be sold through the A.S.X.? ' i) Endowment warrants. ii) Trading Bank Deposits. iii) Options to purchase listed ordinary shares. iv) Unlisted public company shares. (d) A technical analyst: i) believes that ali shares have an intrinsic value. ii) believes that share markets are weak form efficient. iii) believes that share markets are strong form efficient. iv) believes that share prices exhibit patterns that may be exploited for gain. (6) The order processing system used by the New York Stock Exchange is: i) SEATS. ii) SuperDOT. iii) CHESS. iv) CORES. AFF2701__le page 3 of5 OFFlCE USE ONLY [1:11. AFF2701 EQUITY MARKETS (f) Comet Air Ltd. Shares are currently trading at $1.50 when the firm decides to make a 1:4 rights issue to existing shareholders. If the new shares will be sold at $1.30, the theoretical value of the rights should be: i) 20 cents. ii) 25 cents. iii) 16 cents iv) 10 cents. (g) The Australian Stock Exchange is a market for the sale of: i) foreign currencies. ii) corporate shares. iii) long-term debt instruments. iv) short-term debt securities. (h) To apply for listing on the Australian Stock Exchange a company must: i) at least 100 shareholders holding a minimum of $5000 in shares. ii) at least 200 shareholders holding a minimum of $5000 in shares. iii) at least 400 shareholders holding a minimum of $2000 in shares. iv) at least 500 shareholders holding a minimum of $2000 in shares. (i) An unlisted company has on issue 20,000 shares. The firm’s afier tax profit for the previous year was $30,000. If similar firms are trading on a price/earnings ratio of 5 times, the best estimate of the current market price would be: i) $10.00 ii) $7.50 iii) $5.00 iv) $2.50 (j) An example of a Price Weighted Share Index is: i) NYSE Composite ii) S & P 500 iii) Financial Times Ordinary iv) Dow Jones Industrial (10 x l = 10 marks) AFF2701__le Page 4 of5 OFFICE USE ONLY EC] . AFF2701 EQUITYMARKETS Question Two (a) Briefly describe the role of an underwriter in an initial public issue of shares (1P0). (b) When would a company choose to employ an underwriter for an IPO? (6+4= 10 marks) Question Three Fundamental analysts use publicly available financial data to select shares for investment. (a) Explain why the analysts use this process. (b) What type/s of tests could be undertaken to prove whether this is a valid activity. (4 + 6 = 10 marks) Question Four Explain the benefits to a shareholder of investing in: (a) Redeemable Preference Shares. (b) Participating Preference Shares. (0) A Rights Issue of Ordinary Shares. (3 x 4 + 12 marks) Question Five List and briefly explain the three reasons why individuals and other investors trade in publicly listed securities. (3 x 3 = 9 marks) Question Six When placing a sale or purchase order through a stock broker, investors face a number of risks based on the type of order placed. Describe the types of orders that may be placed, and explain the risks related to each. (5 x 2 = 10 marks) Question Seven Chartists use share price pattems to select investment opportunities. List three different types of patterns used by these analysts and explain how each may be used to determine a buy/sell decision for share investment. (3 x 3 = 9 marks) AFF2701_le Page 5 of5 ...
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MU - S1 2004 - Equity Markets - MONASH UNIVERSITY LIBRARY...

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