Exam (elaborations)

ECS2605 Exam pack 2024(South African Financial System)Questions and answers

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Course
South African Financial System

Institution
University Of South Africa

ECS2605 Exam pack 2024(South African Financial System)Questions and answers With accurate answers and assurance that they are in the exam

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Uploaded on September 20, 2024
Number of pages 123
Written in 2024/2025
Type Exam (elaborations)
Contains Questions & answers

ecs2605

gabrielmusyoka940 Member since 1 year 637 documents sold

ECS2605 EXAM PACK
2024

QUESTIONS AND
ANSWERS
FOR ASSISTANCE CONTACT
EMAIL:

, lOMoARcPSD|46589353

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.

, lOMoARcPSD|46589353

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%

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