Ftx3044

FTX3045S_Test I Solutions

TEST MARK APPEAL You can appeal for your mark to be upgraded or to be downgraded. Below are the conditions to appeal. 1. If you benefited undeserving marks from an error in marking or addition. 2. If you lost deserving marks from an error in marking or addition. 3. Your scripts will be handed to you during your tutorial sessions and you can only appeal during the first 45 minutes of the tutorial session. THINGS TO NOTE ABOUT APPEALING FOR MARKS  Please note that once you take the script out of the tutorial venue and after the first 45minutes of the tutorial, you will not be allowed to appeal.  Once you sent back your script to appeal for marks, the whole script will be re-marked, whether you are appealing for an upward or downward adjustment. The re-mark can have negative and positive consequences. For example a simple addition error for 2 marks may result in you loosing 6 marks or you gaining 7 marks after a complete remark. This is because during the re-marking we may pick some areas where you benefited/ lost due to an error in marking. So be guided accordingly.

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SECTION A: [35 MARKS] QUESTION 1 (35marks) 1.1 FROM THE SNAPSHOT YOU CAN SEE THAT THE SAPPI BOND WAS ISSUED AT A

YIELD SPREAD OF 358 BASIS POINTS TO THE DBR WHICH MATURES IN 2018, GIVE THREE POSSIBLE REASONS FOR THAT. [THE DBR IS A GERMAN BENCHMARK GOVERNMENT BOND]. [3]

NOTES-The Sappi bond was issued in Euro, so it was benchmarked against a triple A rated German government bond. So the 358bp spread is the spread between a government and a corporate bond. Students should discuss the possible reasons behind the yield differential between a g government and corporate bond in general.

MARKERS

 It’s sufficient to just list the points without explaining-give full marks

 The high default risk on corporate bonds means investors demand a higher yield to compensate for expected loss from default. Government bonds are considered to be risk free and attract a...