Exam 2004 first sit open part

Exam 2004 first sit open part - a) What are the...

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Question 1 a) What are the advantages of an ECN over traditional stock exchanges? List 4 advantages and explain (4 points) b) Explain how an ECN works. Use a drawing to illustrate your explanations (4 points) c) What is your opinion about the future of ECNs? (6 points) Question 2 EQUITY a) There is a one year zero-coupon T-bill with a price of €956.93 and a two year zero-coupon T-bill with a price of €907.02. Calculate the yield to maturity for these two bonds. b) Now, there is a third bond, a corporate bond, with an annual coupon rate of 7€ and a yield of 4.5%. The face value is, like the other bonds’, €1,000. Calculate the duration of the three bonds. c) Explain the relationship between price, face value, yield, current yield and coupon of a premium bond. Question 3
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Unformatted text preview: a) What are the characteristics of value stocks and growth stocks? Explain by referring to book-to-market ratio, price-to-earnings ratio and dividend payout ratio (6 points) b) Explain the Value-Growth Anomaly. Use the regression output below to clarify your answer (8 points) Resumen Estadísticas de la regresión Coeficiente de determinación R^2 0.0535 R^2 ajustado 0.0509 Error típico 2.48 Observaciones 355 Coeficientes Error típico Estadístico t Probabilidad Intercepción 0.2901 0.1362 2.1300 0.0339 S&P 500-0.1333 0.0298-4.4690 0.0000 c) Imagine an investor is confident that growth stocks will outperform value stocks in the next two years. Give two methods the investor could use to exploit the expected difference in performance (2 points)...
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