ECS2605 EXAM PACK
2024
QUESTIONS AND
ANSWERS
FOR ASSISTANCE CONTACT
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ECS2605
1) An NCD is issued by a South African bank with a nominal value of R 3 000 000 for 91 days
at an annual interest rate of 5.500%. Then, 36 days later (i.e. 55 days before the expiry), the
NCD is traded at a market interest rate of 6.000%
a. What is the maturity value (MV) of the instrument? (2)
MV = NV x (1 + i x n)
= R3 000 000 x (1 + 0,055 x 91/365)
= R3 000 000 x (1 + 0,013712)
= R3 000 000 x 1,013712
= R3 041 136.
2) An NCD is issued by a South African bank with a nominal value of R 3 000 000 for 91 days at an
annual interest rate of 5.500%. Then, 36 days later (i.e. 55 days before the expiry), the NCD is traded at
a market interest rate of 6.000%
b. What are the proceeds to the seller in the secondary market? (2)
MV = NV x (1 + i x n)
= R3 000 000 x (1 + 0,055 x 91/365)
= R3 000 000 x (1 + 0,013712)
= R3 000 000 x 1,013712
, lOMoARcPSD|46589353
= R3 041 136.
P = MV / (1+ i x n)
= R3 041 136/ (1 + 0,060 x 55/365)
= R3 041 136/ (1 + 0,009041)
= R3 041 136/ 1,009041
= R3 013 887,44
3) An NCD is issued by a South African bank with a nominal value of R 3 000 000 for 91 days at an
annual interest rate of 5.500%. Then, 36 days later (i.e. 55 days before the expiry), the NCD is traded at
a market interest rate of 6.000%
c. What is the capital pro 昀椀 t/loss of the primary market buyer a 昀琀 er the sale in the secondary market?
(2)
The capital pro 昀椀 t or loss = total income – accrued interest
Total income = R3 013 887 – R3 000 000 = R13887.
Accrued interest = Amount paid x i x nh
= R3 000 000 x 0,055 x 36/365
= R3 000 000 x 0,005425
=R16 275.
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The capital pro 昀椀 t (loss) = R13 887 – R16 275 = –R2 388.
4) An NCD is issued by a South African bank with a nominal value of R 3 000 000 for 91 days at an
annual interest rate of 5.500%. Then, 36 days later (i.e. 55 days before the expiry), the NCD is traded at
a market interest rate of 6.000%
d. What is the annual yield realised by the seller in the secondary market? (2)
MV = NV x (1 + i x n)
= R3 000 000 x (1 + 0,055 x 91/365)
= R3 000 000 x (1 + 0,013712) = R3 000 000 x 1,013712 = R3 041 136
P = MV / (1+ i x n) = R3 041 136/ (1 + 0,060 x 55/365)
= R3 041 136/ (1 + 0,009041) = R3 041 136/ 1,009041 = R3 013 887,44
Total income = R3 013 887 – R3 000 000 = R13 887.
Annual yield = Total income/amount paid x 1/nh
= (R13 887/R3 000 000) x 365/36
= 0,004629 x 10,138889 = 0,046933
=4.69%
Downloaded by Gabriel Musyoka (gabudeking@gmail.com)