MU - S1 2000 - Equity Markets

MU - S1 2000 - Equity Markets - MONASH UNIVERSITY LIBRARY I...

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Unformatted text preview: MONASH UNIVERSITY LIBRARY I H llllllllllll 00409297? OFFICE USE ONLY Monash University Semester One Examinations 2001 Faculty of Business and Economics Department of Accounting and Finance EXAM CODES: AF F2701 TITLE OF PAPER: EQUITY MARKETS EXAM DURATION: 3 Hours READING TIME: 10 Minutes THIS PAPER IS FOR STUDENTS STUDYING A T: (office use only - tick where applicable) Berwick U Clayton El Peninsula El Distance Education D Open Learning El Caulfield Gippsland El Sunway El Enhancement Studies El Other (Specify) E! 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 OPEN BOOK SPECIFICALLY PERIVIITTED ITEMS if yes, items permitted are: This paper consists of Seven (7) questions and one graph printed on a total of Five (5) pages. PLEASE CHECK BEFORE COWNCING. This is 3 FINAL paper. The total number of marks available in this examination is 70. THIS PAPER MUST BE RETURNED WITH SCRIPT BOOK. 105231.13 OFFICE USE ONLY AFF2701 EQUITY MARKETS _ _ Answer the following questions in the answer booklet provided by writing the question number, the . part (a-zj) and the nominated answer. Select the response that you feel best answers the question asked. Question 1 (a) Techcorp Ltd. has on issue 2,000,000 ordinary shares. Last year the firm’s net profit was $l,500,000, and it is currently trading on a Price/Bantings of 16. The current share price is: (i) $15.00 (ii) $12.00 (iii) $10.00 (iv) $ 0.00 (b) A sale of shares through the Stock Market would constitute an example of: (i) an. over-the-counter transaction. (ii) a direct financial transaction. (iii) a secondary market transaction. (iv) a primary market transaction. (0) A fundamental analyst: (i) believes in charting prices and volumes of shares. (ii) believes that markets are strong-form efficient. (iii) believes there is no serial correlation between successive share prices. (iv) believes that shares have an intrinsic value. (01) A disadvantage of using a corporate structure for the operation of a firm is: (i) there is the separation of ownership and control. (ii) the firm is a separate legal entity. (iii) wider access to finance is obtained. (iv) the firm may obtain limited liability. (e) The net book value of a company is: (i) the sale value of the assets less the liabilities. (ii) the sale value of the assets less the proprietorship. (in) the recorded value of the assets less the liabilities. (iv) the recorded value of the assets less the proprietorship. 10523LE Page 2 of 5 OFFICE USE ONLY I AF F2701 EQUITY MARKETS . (f) A Bonus Share Issue will (i) increase the value of total assets. (ii) increase the value of owners’ equity. (iii) increase the value of unappropriated profit. (iv) increase the value of issued shares. You are a market maker who is significantly short in a share (holding very little). You will most likely: (i) lower your bid quote. (ii) raise your offer quote (iii) lower your offer quote. (iv) raise your bid quote. To apply for listing on the ASX a cempany must have: at least 100 shareholders holding a minimum of $5,000 in shares. at least 200 shareholders holding a minimum of $5,000 in shares. at least 400 shareholders holding a minimum of $2,000 in shares. at least 500 shareholders holding a minimum of $2,000 in shares. Techno Limited plans to operate in the communications industry, and is about to list on the Australian Stock Exchange. The company has been advised to appoint an underwriter to the new share issue. The basic role of an underwriter is to: provide advice on the timing of the share issue ensure the company complies with ASX listing rules establish a deep and liquid secondary market in the shares purchase any unsold shares on issue to shareholders at a cost of 95cents for each new share. The price of the shares on an ex- rights basis should be: (i) $1.20 (ii) $1.15 (iii) $1.10 (iv) $0.95 (10 x 1 = 10 marks) Question 2 The Australian Stock Exchange has been described as a “weak-form eficient market”. Explain what is meant by the term “weak-fonn efficient market”, and provide examples of tests that have been used to determine the level of efficiency. (8 marks) 10523LE Page 3 of5 OFICE US LY I AFF2701 EQUITY MARKETS Question 3 Many companies that are intending to make a new issue of shares acquire the services of an underwriter. Describe the services that an underwriter may offer to a company making an initial public offer of shares. (6 marks) Question 4 When attempting to raise funding, a newly established company may find it easier to offer “hybrid securities” to the market. Explain what you understand by the term hybrid securities, and why they may be an attractive way of raising finance. (6 marks) Question 5 (a) Describe how the opening price for a share is determined on the Australian Stock Exchange. (b) Clearly discuss how the Australian Stock Exchange opening procedure differs from that of the New York Stock Exchange and the Tokyo Stock Exchange. (5 + 5 == 10 marks) Question 6 Indices may be constructed on a value-weighted, equally—weighted or priceaweighted basis. Describe how each construct differs from the others, and, explain the disadvantages that may arise under each of the different methods. (15 marks) Question 7 From the graph below, list the different technical patterns you can observe in the share price movements, specify the dates covered. by those patterns, and briefly explain the significance each of the patterns would have for a Chartist. (15 marks) 10523LE Page 4 of 5 —-——_.._ Page 5 of5 .20 Ofifiuflm .uCZU _H_NO_<_ Amxmxoo 4.0 aflxmmeA Hub—FIN E [JI.I.'||1.|Il—IF \fillalllqul.llll .I—|ll||_.lll.l ll _u.i.:.ulIlull._|||||l.ld|.|.l.|I.” 2394‘ LCZ LC? b,an mum—U 001—. ZO<aUmO L>2 *Hmw 75>.» bang—.1)» §>< IRWI ‘— .N4 wax mxoo FO<< .— .00 4V\ m\QO _I>mw.._1 .54 A WOCHOWH U>Aa>mnfifinm>7> ...
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This note was uploaded on 08/25/2008 for the course AFF 3111 taught by Professor Smith during the Three '08 term at Monash.

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MU - S1 2000 - Equity Markets - MONASH UNIVERSITY LIBRARY I...

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