TFIN 603 Corporate Finance, Term 1, 2021 Major ASSIGNMENT

AUSTRALIAN NATIONAL INSTITUTE OF MANAGEMENT AND COMMERCE (IMC)

Due Date:             Week 10, Monday 17^h May at 5.00pm.

Course Weighting:    25% (This assignment is marked out of 100%)

Word Length: up to 1500 words + charts and tables. Need to work as a group of 2 students. Reference Style: Harvard

Presentation Guidelines:

• You are expected to write this assignment in Word format in a clear and logical manner and should include a cover page available on the IMC website. Each group has to submit one pdf assignment.
• You must use size 12 font Times New Roman, 1.5 line spacing, 1-inch margins and 1-inch top/bottom margins. Tables can be single-spaced and the font size should not be smaller than 8pt; and tables must be numbered sequentially using Arabic numerals. Any illustrations used must be very clear and easy to understand.

Assessment Criteria:

You should be aware that assignments will be checked for plagiarism. Plagiarism is punishable by reduction or cancellation of marks, and in the most serious cases, exclusion from a unit, a course or the University. This warning applies to a case where a student submits somebody else’s work as their own, AND to a student who willingly allows another to copy and submit their work. I expect your plagiarism match with any source (internet or other groups) to be less than 10%. Plagiarism policy is described in the TFIN603 unit outline.

Submission and Request for extension.

• Submit your assignment including a cover sheet through TURNITIN found on Moodle under the ‘Major Assignment’ icon. The electronic copy must have signed cover sheet with name and student ID on the Cover Sheet. Please remember that you are responsible for lodging the assignment on or before the due date.
• If you require an extension for this report then you need to contact your lecturer at least one week before the due date to make other arrangements.

Suppose you work as a junior analyst in one large Australian mining firm, which mainly export coal to Japan. The company has 100 million dollars to invest for up to 10 years in a financial instrument. Your boss, who knows a lot about finance, ask you to investigate the possibility to invest the full amount in one or more 10 year-bonds (for one or different countries) to diversify the risk of being totally exposed to the Japanese economy.

Your task is to write a report about 10 years government bonds (you can choice one or more of the countries/bonds in the data folder) and provide a recommendation for the company to invest (for example 30% in bond of country X and 20% on bonds of country Y, etc…). Other investments such as share will not be considered for the company.

This is a great opportunity to test your understanding of this financial instrument and understand what factors you should consider for this investment. For this assignment marks will be allocated in the following manner:

Please use the following format to write your report (Rubrics are in brackets):

1. General introduction and characteristics of this investment (10-year government bonds).

[20 marks]

• Use the data in the file: 10 year bond.xls to construct a table of the correlation amongst each pair of all 10- year bond yield, described your results and investigates why some countries yield are very high correlated.

[20 marks]

• Given the objective of the firm to diversify from Japanese risk, recommend a portfolio investment for the next 10 years.

Domestic and international economic context (e.g. interest rates, exchange rates economic growth and inflation)

Diversification Risk/return Liquidity

[60 marks]

[Total Marks 100 marks]

General Information:

All data is available in the folder 10 year-bond.   You do not have to buy any data for this assignment all data you need is either in the assignment folder or on the following websites:

http://www.tradingeconomics.com/bonds-list-by-country http://finance.yahoo.com/

http://www.rba.gov.au/chart-pack/exchange-rates.html http://www.ecb.int/stats/html/index.en.html http://research.stlouisfed.org/fred2/

To learn how to estimate correlations please see: Simple correlation: https://www.youtube.com/watch?v=uYgonHCug04

Correlation matrix:

How should I approach the assignment?

1. Read Chapter.
   1. Make sure you understand very well : how bonds work
   1. Focus in government bond
   1. Par and face value
   1. The relationship between interest rate and bond prices
   • The relationship between bond prices and other factors
2. Research about the economic outcome in many countries (and the global economy) and make your economic assumption in the following areas:
   1. Economic growth forecast in key countries/regions
   1. Exchange rate (bilateral exchange rates to Australian dollar)
   1. Perspectives of government bonds in key countries/regions
   • Bond liquidity and current prices

You can find this information at the central banks website: for example: http://www.rba.gov.au/

http://www.federalreserve.gov/ https://www.ecb.europa.eu/home/html/index.en.html

• Produce a correlation table
• Create a portfolio based on point 2 and 3.

Marking Rubric:

Assessment Criteria and Performance Standards for Report
Assessment criteria	Mark	Performance Standard
Low – Learning outcome not achieved	Low but some evidence of attainment of required learning outcome	Learning outcome achieved as required but some inaccuracies and errors	Learning outcome achieved as required with very few inaccuracies or errors	Exceptional attainment of learning outcome with additional outcomes and information provided
Executive Summary and introduction	/15	0 – 1	2	3	4	5
No clear executive summary and introduction provided	Brief executive summary and introduction but incomplete and inaccurate	Executive summary and introduction provided but could be more concise and clear	Clear executive summary and introduction provided too wordy	Clear, concise and well expressed executive summary and introduction provided
Research and data collection	/25	0 – 1	2	3	4	5
No evident research into the topic	Some research evident but little quantifiable research presented	Some research is evident but limited citations appropriate to context	Adequate secondary and some primary research is evident with supporting data and citations appropriate to context	Primary and secondary research and data collection is extensive with particularly insightful citations
		0 – 1	2	3	4	5

Critical thinking, analysis & synthesis	/30	Very little or no evidence of understanding of the topic	Some understanding of the topic evident but with little evidence of analysis	Understanding of the topic evident – some critical thinking with analysis and synthesis of available literature	Good understanding of the topic with evidence of critical thinking with deep analysis and synthesis of information	Very high level of understanding of the topic with insightful evaluative comments and conclusions
Conclusion and recommendation	/15	0 – 1	2	3	4	5
No clear recommendation or conclusion Provided	Brief conclusion and recommendation provided but not particularly clear or relevant	Well summarised but not totally relevant to context	Well summarised clear, relevant and concise conclusion & recommendation	Exceptional conclusion & recommendation – clear, concise and insightful
Report Structure, writing style & grammar	/10	0 – 1	2	3	4	5
Very poor	Some evidence	Structured	Good structured	Very good
structure,	of desired	report with	report with high	structured with
grammatical	structure with	average levels	level of writing	very high level of
expression and	low levels of	of writing ability	ability – clear	writing ability
spelling errors	writing ability	with some	concise	with no
	evident, simple	spelling and	expression with	grammatical or
	expression with	grammatical	few grammatical	spelling errors.

7

			many spelling and grammatical errors	errors	or spelling inaccuracies
Referencing	/5	0 – 1	2	3	4	5
None or few references, citations or appendices	Some references but lacking in accuracy or proper use of a referencing style	Appropriate references with use of appendices to support main report but some inaccuracies in the use of a referencing style	Appropriate references with use of appendices to support main report; very few inaccuracies in the use of a referencing style	References fully accurate and report supported by extensive use of appendices and go well beyond suggested by lecturer
Total Marks and Feedback	/100	Detailed Comments (these might be directly written on the hard copy or electronic copy
Areas of improvement

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