Listing on a stock exchange might be highly desirable for a company, but there are a number of requirements, conditions and costs associated with becoming a publicly listed corporation.
1) Identify and explain 10 specific requirements that must be met by an Australian company seeking general admission to the ASX. (10 points)
2) Discuss the ASX profit test and asset test requirements and explain why these riles are in place. (10 points)
3) Identify and explain the different costs that a company will have to meet in the process. What impact will these have on the liquidity management of the firm? ( 5 points)
(Hints: just dot points answers will be fine)
Problem 2 (25 points)
On your first day of trading in Vietnamese forward contracts, you observe that the share price of Giap Industries is currently 54,000 dong while the one-year forward price is 60,000 dong. If the yield on a one-year riskless security is fifteen percent, are arbitrage profits possible in this market? (Show your calculation) (10 points) If not, explain why not. If so, devise an appropriate trading strategy. (15 points)
Problem 3 ( 25 points)
A fund manager forecasts that it will need to invest $1 mill in approximately 90 days. The manager wishes to receive a return as close as possible to the medium interest rates currently available, but expects that the rates will have fallen by the time the funds are available for investment.
1) Outline what the manager would do today in the financial futures market in order to secure a return that is close to current medium term markets rates. (8 points)
2) Calculate the price of a three year treasury bond futures quoted at 95.25 (6 points)
3) Outline how fund manager would close out the futures market position. (6 points)
4) Outline and explain the factors that will determine how successful this strategy will be securing an effective return that is close to today’s market rates. (5 points)
Problem 4 (25 points)
1) A company knows that it will need to borrow $500,000 in six months’ time and is concerned that interest rates may rise before that date. The company wishes to protect itself against a rise in interest rates and decides to use an options collar strategy. Explain how a collar strategy is structured and why the company might consider this type of strategy. (15 points)
2) There is an expectation of increasing price volatility in the market due to the lingering effects of the GFC (Global Financial Crisis), problems with the world economy and concerns about sovereign debt. Design an option strategy that will enable a profit to be locked in, regardless of future direction of asset prices. ( 10 points)