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Question 1

Guidance

This question counts for 20 marks and should comprise

approximately 500 words.

Required

Critically analyse the valuation process for equity securities.

Suggested structure:

1. Introduction to equity markets.

2. Valuation techniques for equity securities.

3. Limitations of these valuation techniques.

4. Conclusion.

Question 2

Guidance

This question is to be answered by the group as a whole. The question counts for 20 marks

and should comprise approximately 1,000 words.

Required

The Monetary Policy Committee of the Bank of England is expected to raise interest rates in

the near future. Given what you know about fixed-income security valuation, discuss how

this might affect bond prices.

In addition, discuss the reasons why companies would prefer to issue debt to raise funds

rather than issue further equity. uggested structure:

Describe: Impact of rising interest rates.

Source: Rutterford and Davison (Chapters 3 & 4)