Each section will require approximately 500 words (approximately 2,000 words in total) – Obviously more words for questions that require explanations than calculations. Please also consider the marks for each question, which are identified at the end of the question.

Questions are as follows;

a) As at 1 July 2015, a T-bond had the listed spot price being $95.40, and the listed futures price being $95.60. An investor sold $100,000 T-bonds at par value, and bought a T-bond futures contract. On 1 August 2015, the T-bond’s listed spot price was $95.00, and listed futures price was $94.40. Calculate the profit should the investor decide to liquidate his position. (5 marks).

b) Identify and explain five differences between futures and forward contracts. (20 marks).

Equity valuation is based purely on accounting information on the firm’s performance. It does not require the analyst to access information outside the company’s financial statements in order to forecast company earnings and returns.

a) Provide a critical but brief evaluation of this statement based on your understanding of the role of fundamental analysis in determining equity value. (13 marks).

b) Consider the process of equity valuation based on fundamental analysis and the information required for this process. What types of information would prove useful to the equity analyst? From where would each form of information that you mention be sourced? (12 marks).

An investor is evaluating three investment funds, for which the average returns, standard deviations and betas are given below. Assume the risk-free return during the relevant period is 8%.

	Average Return	Standard Deviation	Beta
Fund 1	22%	25%	1.3
Fund 2	20%	18%	1.2
Fund 3	15%	12%	1.1