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Applied Foundations of Finance (FINM7006)

Tutorial 1 Questions

Question One

What is the primary role of financial markets?

Question Two

What are the three principal sets of players that interact in the financial markets?

Question Three

What is a financial intermediary? List and describe the principal types of financial intermediaries in the Australian financial markets.

Question Four

Describe the flow of funds within the financial system.

Question Five

Describe the difference between the primary and the secondary market.

Question Six

Discuss the main differences between money markets and capital markets. Describe these markets and name some instruments that are traded on these markets.

Question Seven

What is the intercompany market? Is it regarded as a money market or a capital market?

Question Eight

To what amount will the following investments accumulate?

a) $5000 invested for 10 years at 10% compounded annually;

b) $8000 invested for 7 years at 8% compounded annually;

c) $775 invested for 12 years at 12% compounded annually; and,

d) $21000 invested for 5 years at 5% compounded annually.

Question Nine

If you deposit $10000 today into an account earning an 11% annual rate of return, in the third year how much interest would be earned? How much of the total is simple interest and how much results from compounding of interest?

Question Ten

What is the present value of the following future amounts?

a) $800 to be received 10 years from now discounted to the present at 10%

b) $300 to be received five years from now discounted to the present at 5%

c) $1000 to be received eight years from now discounted to the present at 3%

d) $1000 to be received eight years from now discounted to the present at 20%.