161. A central bank wishes to indicate that its official interest rate will be 4.5% from tomorrow. What repurchase price should it set for 28 day repo deals in government bonds valued at £1m?
Correct answer: (B)
£1,003,452
162. A company has just declared a dividend of 8p per share on shares current valued at £1.50. Dividends have been growing steadily at 5 per cent p.a. The dividend yield on these shares is is:
Correct answer: (B)
5.3%
163. A corporate bond paying an annual coupon of £9 matures for £100 on 30 September 2011. What is its price on 1 October 2008 if interest rates are 8.5 per cent?
Correct answer: (C)
£101.28
164. A downward sloping yield curve most likely indicates:
Correct answer: (B)
Low prices for long-dated bonds
165. A firm announces that its next dividend payment will be 12p per share. The shares are currently priced at £1. The firm's earnings have recently grown at a rate of 9 per cent per year and this is expected to continue. The total annual return on these shares is:
Correct answer: (A)
21%
166. A government sale of treasury bills to the central bank is the nearest thing in a modern economy to:
Correct answer: (A)
Financing a government deficit
167. A mutual fund manager shifts part of his portfolio from long-dated bonds to money market instruments even though yields are unchanged. Most likely he is expecting:
Correct answer: (E)
A rise in long-term interest rates
168. A retirement annuity is particularly attractive to someone who has:
Correct answer: (A)
High longevity risk
169. A share with a β-coefficient of 0.9 has a rate of return of 16%, when the whole market return is 17%. What return should it produce if the risk free rate rises from 7% to 8%, ceteris paribus.
Correct answer: (B)
17%
170. A sudden demand by depositors for notes and coin is an example of:
Correct answer: (E)
Liquidity risk