Question

A superannuation fund invests in a six-month maturity commercial paper issued by Aussie Finance, a finance company. Aussie Finance uses the funds to invest in a six-year maturity corporate bond issued by an oil company who plans to buy a new drill. Assume that all parties held instruments until maturity and that all instruments were issued at their face value. At the time of the corporate bond’s redemption, which of the following is NOT correct?

1. The Superannuation’s balance sheet size is unaffected.

2. The DSU’s bank deposits decrease

3. The superannuation fund receives bank deposits II

4. The corporate bond is removed from the Aussie’s balance sheet

5. The DSU’s balance sheet contracts

Answer 1

Lets analyse the question

• Here is a 1st party who invest in a superannuation fund for six months in commercial paper
• Commercial paper are issued by a finance company Aussie finance.
• Finance company Aussie finance received the fund and invest these funds to corporate bonds for six years.
• Corporate bonds are issued by an OIL comapany.

NOW first we will see the correct statement in the question at the time of redemption of CORPORATE BONDS
1.Superannuation fund receivs bank deopite at six moths maturity
2.The corporate bonds is remved from the aussie balance sheet
3.The DSU's bank deposite decrease due to maturity of superannauation funds investment

HENCE, in the given question statement whcich is not correct is:
The Superannuation’s balance sheet size is unaffected.