BUSN2037 FINANCIAL MANAGEMENT
S2 2017
WRITTEN ASSIGNMENT
1. The assignment can be done individually or in pairs. If done in pairs, only one member of the pair should submit the assignment (to help mitigate administration burden and confusion).
2. Save the assignment using your last name(s) and student ID(s) in a PDF file
3. Font size: 11-12. Total pages: approximately 4-7
4. Submit the assignment on FLO 5. Due: 3 October 2017 11pm
6. Guide on mark allocations:
• Correct results: 45% (rounding errors are acceptable).
• Detailed workings, explanation of the calculation processes and interpretation of results: 45%.
• Presentation: 10% including general presentation, grammar and spell check.
• Group members should work together for ALL parts of the assignment. This helps you prepare for the final exam (the exam will cover all the chapters).
7. Any assignment received after the due date will be dealt with as outlined in the Policy on Late Submission in the Topic Guide.
8. Failure to submit the assignment for this topic is deemed to constitute failure to meet the assessment requirements for the purposes of eligibility for a supplementary assessment on academic grounds (see Topic Guide).
9. Plagiarism and other forms of academic dishonesty are treated as serious offences by the University and are subject to penalties, which may include expulsion from the University. Ensure that you have read and understood the University’s policy on academic dishonesty, as contained in the Student Related Policies and Procedures Manual.
If you would like us to return your assignments as early as possible, please try to submit them on time and minimize extension applications. We mark offline and will download the assignments when we see about 95% of the students have submitted their papers. Late submissions and extensions will delay the marking process.
QUESTION
This question requires some calculations, research and open discussions.
Westpac Banking has a bond issue that pays 8% interest with a $100 face value. The bond matures in 20 years. The required yield for similar risk securities is 7%.
1. Calculate the value of the bond.
2. How does the value change if the market’s required yield on a comparable risk security increases to 10% and then decreases to 6%?
3. Discuss your answers in (2) as they relate to interest rate risk, premium and discount bonds.
4. Assume the bond matures in 10 years instead of 20 years. Recalculate your answers in
(2).
5. Compare the results you find in (2) and (4) and discuss the change in the value of longterm and short-term bonds when the market’s required yield changes.
6. Provide some examples (events occurring in the financial markets, in the industry and within the firm) which could cause (a) an increase and (b) a decrease in the required yield.
7. Investigate the Australian bond and share markets: search for their market value (market capitalisation) in dollars and as a percentage of Australia’s GDP. Compare and discuss your answers.
Notes: 2014, 2015 or 2016 figures are all acceptable, however more recent figures are preferable. Comparable figures are required (i.e. balances should be recorded in the same year). Use official resources published by government organisations or financial institutions. Try not to use Wikipedia resources.
GOOD LUCK