Answers for Tutorial Questions due Week 6

Answers for Tutorial Questions due Week 6 - Answers for...

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Answers for Tutorial Questions due Week 6 8.4 When would the Australian Office of Financial Management issue treasury indexed bonds if it wants to minimise its repayments? When would investors most keenly demand them? Treasury indexed bonds are instruments whose coupon payment change as a result of changes in the inflation rate. First, the principal is revised, and then coupon payments are calculated as a % of principal. If AOFM wants to minimise the coupon repayments they would issue them when the inflation is low as minimal upward adjustment is necessary. Investors will demand them when the inflation is high to protected their buying power. 8.6 List three types of hybrid securities and the features they might have. 1. Convertible notes - can be converted to ordinary shares at the investor’s discretion - have lower yields than similar nonconvertible bonds - usually have call provisions so the issuer can force conversion when the market value is greater than face value 2. Stapled securities
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Answers for Tutorial Questions due Week 6 - Answers for...

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