2005 april no4 A bond has a value of £1,000 printed on its face. Its current open market value is £980. Analysts expect the value of the bond to rise to £985 within the next seven days. In your personal opinion it will rise to £982. What is the nominal value of this bond? A. £ 980 B. £982 C. £985 D. £ 1000 Can i know why the answer is D? no 5 Preference shares are often thought of as being more like debt than equity. Which of the following best explains this? A. the tax treatment of preference dividends B. the ability to buy and sell preference shares C.the fixed nature of participation in profits D. the ability to make capital gains or losses why the answer is A? no6 A business has decided to acquire a specialised p iece of machinery using a finance lease. A bank has agreed to buy the asset on the business behalf and will lease the asset for the whole of its useful life. When will the asset become the property of the business? On delivery of the asset. On the first lease payment. Once the final lease payment has been made. Never. Can I know why the answer is never no 10 An investor sold a holding of a stock with the intention of buying a n identical holding of the same stock a few weeks later at roughly the same price. What possibility best explains the likely reason for this behaviour? The investor is keen to develop a relationship with a new broker. The investor is trying to realise a capital gain in order to utilise an annual tax allowance that will be lost otherwise. The investor is trying to stimulate the market s interest in the shares by generating trading volume. The investor wishes to confirm the liquidity of the stock which would be the correct answer and why?
Hi Again, short but hopefully sufficient responses Q4 : Nominal value is the value printed on the face of the bond. This is from the basic description of bonds, Chapter 4. Q5 : The answer is actually C. It's not A as preference shares are taxed more like equity than bonds. However, a feature preference shares have in common with debt/bonds is that they pay a fixed amount each year. Again, this comes from descriptions of these investments in Chapter 4. Q6 : Part of the definition of a lease is that ownership of the asset doesn't actually ever change hands. Q10 : I'd go for B.
