4100 words
Financial Markets and Economic Principles
(FIN101)
Assignment
Assignment marks: 75 | Presentation marks: 5
Total marks: 80
Student No.: 10594732
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Instructions to students
• This assignment covers Topics 1 to 7 and accounts for 40% of your final grade.
• There are two (2) sections in this assignment:
– Section A comprises three (3) short-answer questions worth a total of 50 marks.
– Section B comprises two (2) short-answer questions worth a total of 25 marks.
You should answer all questions.
• Marks are awarded for assignment presentation and referencing.
• You are required to conduct research beyond the FIN101 subject materials to assist you in answering some of the assignment questions.
• The overall word limit for the assignment is 4100 words. Marks will only be awarded for answers up to the word limit (plus 10%) for each question. Any material written after this will not be counted towards your mark for that question. Headings, quotes and references within the body of the answer are included in the word count. Numerical tables, calculations, and reference lists are not included. For more information on word counts and their rationale, go to Assessment ? Assignment ? General assessment information.
• Refer to the Criteria-based Marking Guide for guidelines on what is expected for each question.
• The ‘General assessment information’ section in KapLearn contains information about format and presentation, word limits, citations and referencing, collusion, plagiarism and other policies, useful resources, submitting your assignment and accessing your results.
• Full workings must be shown for all calculations. Show all calculations in the text of your assignment and NOT attached as an appendix. Appendices to assignments will not be read.
• Answers are to be in your own words. Reference and cite all your sources (within the text of your answer) when quoting or using material from external sources. Include a reference list at the end of your assignment. For further information on referencing, refer to the ‘Referencing Guide’ available under the Additional resources from the Learning Hub.
• Indicative weightings are noted beside each question. Use these weightings to assist you with your allocation of time and resources. The weightings indicate the relative importance of each question.
• State all assumptions used in providing your answer.
• Requests for special consideration or information pertaining to special consideration written in the body of the assignment will not be considered by the marker. Refer to the ‘special consideration’ section of the Assessment Policy on Kaplan’s website for more information.
Learning outcomes (LO) mapping Marks
1. Explain the interrelationships of the major domestic and global market sectors. 20
2. Explain the role of intermediaries in financial markets. 7
3. Assess the changes and impact of key economic and financial indicators on the Australian financial markets. 19
4. Assess the changes and impact of government and monetary policy on the Australian financial markets. 8
5. Compare how the different asset classes are used and traded. 15
7. Analyse current issues driving domestic and global financial markets in a given scenario. 6
Presentation and referencing 5
Total marks 80
Assignment presentation and referencing (5 marks)
You are required to research beyond the subject notes in answering the questions in this assignment. Reference and cite all your sources when quoting or using material from external sources. Include a reference list at the end of your assignment.
You are required to:
• use appropriate presentation and format for your assignment
• demonstrate independent research and analysis
• demonstrate appropriate use of relevant references
• follow the Harvard referencing style as recommended in the ‘Referencing and Citations Guide’ available from the ‘Library Learning Hub’ in KapLearn
• include a reference list at the end of your assignment following the recommended referencing style
• adhere with the assignment word limit.
Criteria-based Marking Guide for presentation and referencing
The Criteria-based Marking Guide provided at the end of each question is designed to assist students to understand what is expected of them in each question and to let them know how their performance will be judged. It provides advice about the criteria used in the marking of the question and what discriminates between an excellent, satisfactory and unsatisfactory answer.
Excellent
(Mark range: 4–5 marks) Satisfactory
(Mark range: 2.5–3.5 marks) Unsatisfactory
(Mark range: 0–2 marks)
• clear and appropriate assignment layout and structure
• adheres to assignment and question word limits
• clear evidence of independent research and analysis incorporated throughout assignment
• appropriate use of referencing
• accurate use of Harvard referencing style
• comprehensive reference list provided at end of assignment • adequate assignment layout and structure
• adheres to assignment and question word limits
• some evidence of independent research and analysis
• appropriate use of referencing
• use of Harvard referencing style
• reference list provided at end of assignment • poor assignment layout and/or structure
• assignment is significantly under or over the word limit
• no demonstrated independent research or analysis
• no use of references
• referencing does not use Harvard referencing style
• no or inadequate reference list provided at end of assignment
Section A (50 marks)
Instructions to students
There are three (3) short-answer questions in this section. Answer all questions.
Section A of the assignment relates to the information presented in the ECC case study.
Refer to the case study on the assessment page and the feedback you received for Analysis Task before attempting this assignment.
Question 1 Global influences on individual companies (15 marks | Word limit: 900 words)
LO1: Explain the interrelationships of the major domestic and global market sectors
LO2: Explain the role of intermediaries in financial markets
LO3: Assess the changes and impact of key economic and financial indicators on the Australian financial markets
You have been asked by the board to build upon the preliminary work that you performed earlier for James and David; collating those notes into a more thorough briefing pack.
The board is interested in two key areas:
(a) In the context of ECC having to choose between the Indonesian Investment and thus becoming IPC, or the acquisition and thus becoming ECR; discuss the key domestic and global financial drivers applicable to both scenarios, explaining the key interrelationships that exist between domestic and international markets. (10 marks — 600 words)
(b) Given the above response, the board is concerned about recent high growth in Australia and is nervous about any RBA intervention. In the context of the above, comment on how your views in
(a) may change if we start to see the RBA increasing rates steadily over the coming two years.
(5 marks — 300 words)
Note: You should build upon your answers from the analysis task. Marks are awarded for your justification and research into the topic. Use the start date of your study period as your base.
Criteria-based Marking Guide for Question 1: Global influences on individual companies
Excellent
(Mark range: 11–15 marks) Satisfactory
(Mark range: 7.5–10.5marks) Unsatisfactory
(Mark range: 0–7 marks)
• draws on advantages and disadvantages listed in analysis task
• has clearly stated an opinion on PCC expansion with comprehensive justification discussing the key domestic and global financial drivers applicable to both scenarios and explaining the key interrelationships that exist between domestic and international markets
• clearly shown evidence supporting their justification
• evidence is supported with extensive independent research • draws on advantages and disadvantages listed in analysis task
• has stated an opinion on PCC expansion with some justification adequately discussing the key domestic and global financial drivers applicable to both scenarios and explaining the key interrelationships that exist between domestic and international markets
• has shown some evidence supporting their justification
• evidence is supported with some independent research • does not draw on advantages and disadvantages listed in analysis task
• has not stated an opinion on PCC expansion and/or with little (or no) justification discussing the key domestic and global financial drivers applicable to both scenarios and explaining the key interrelationships that exist between domestic and international markets
• little (or no) evidence to support their justification
• little (or no) evidence supported by independent research
Insert your answers to Question 1 below this line
End of answers to Question 1
Question 2 Impact of economic growth (25 marks | Word limit: 1000 words)
LO1: Explain the interrelationships of the major domestic and global market sectors.
LO3: Assess the changes and impact of key economic and financial indicators on the Australian financial markets.
At a recent board meeting, many of the board members raised concerns regarding the outlook for global economic growth as well as the possibility that ECC’s contracts with China will not achieve the scale of the projected profitability.
Note: Use the start date of your study period as your base.
(a) Evaluate the outlook for global economic growth over the next twelve months. In your answer include a percentage forecast for global economic growth. Within your evaluation, you should discuss:
• how markets are interrelated, and can directly impact upon each other
• what impact this has on the global commodities market, with particular attention to the energy markets, given this macro-economic global view, and your stated perspective on China
• any currency impacts this may have on the Australian dollar, the Indonesian Rupiah, and the Chinese RMB. (15 marks — 500 words)
(b) (i) The Chinese economy has changed drastically since the early 2000’s. As a result, Chinese Government authorities are presently in the process of restructuring their economy. The board would like to understand what this restructuring is; what this means for the future of Chinese economic growth; and what sectors of the domestic and international economy will be impacted. Briefly explain:
• what this restructuring is
• what this means for the future of Chinese economic growth, and
• what sectors of the domestic and international economy will be impacted?
(4 marks — 200 words)
(ii) Given these changes as anticipated, what do you anticipate these forecasts mean for ECC as a board. Explain what impact these changes will have on ECC, on Australian financial markets, and other related markets (such as commodities)? (6 marks — 300 words)
Criteria-based Marking Guide for Question 2: Impact of economic growth
Excellent
(Mark range: 19–25 marks) Satisfactory
(Mark range: 12.5–18.5 marks) Unsatisfactory
(Mark range: 0–12 marks)
• forecasts provided with comprehensive evaluation on the outlook for global economic growth
• comprehensive discussion on restructuring of the Chinese economy, its influence of the future of Chinese economic growth, and the sectors of the domestic and international economy
• accurate explanation is provided on the impact of changes in Chinese economic restructure on ECC, on Australian financial markets, and other related markets (such as commodities) • forecasts provided with basic evaluation the outlook for global economic growth
• basic discussion on restructuring of the Chinese economy, its influence of the future of Chinese economic growth, and the sectors of the domestic and international economy
• appropriate explanation is provided on the impact of changes in Chinese economic restructure on ECC, on Australian financial markets, and other related markets (such as commodities) • incorrect, incomplete or no evaluation on the outlook for global economic growth
• poor or no discussion on restructuring of the Chinese economy, its influence of the future of Chinese economic growth, and the sectors of the domestic and international economy
• poor or no explanation is provided on the impact of changes in Chinese economic restructure on ECC, on Australian financial markets, and other related markets (such as commodities)
Insert your answers to Question 2(a)–(b) below this line
End of answers to Question 2(a)–(b)
Question 3 Influences exchange rates (10 marks | Word limit: 900 words)
LO1: Explain the interrelationship of the major domestic and global market sectors.
LO7: Analyse current issues driving domestic and global financial markets in a given scenario.
Assume that the ECC Board has decided to stay with the commodity they know best and are in the process of purchasing the Indonesian Coal Mine and becoming Indo-Pacific Coal (IPC).
Prior to the purchase of the mine, the Australian Dollar has depreciated; in the main due to a sharp appreciation of the US dollar. ECC are still committed to the purchase. The funding for the purchase has been approved by way of an offshore loan arranged by a consortium of banks and will be denominated in USD.
Brief the board on the following:
• The impact of the appreciating US dollar on IPC, including the impact on the company’s profit and loss and their balance sheet. (4 marks — 350 words)
• The impact of the appreciating US dollar on the broader international markets (including the FX, interest rate and commodity markets). (4 marks — 350 words)
• Any indicative solutions/strategies which IPC need to consider (note: please do not go into specific hedging strategies). (2 marks — 200 words)
Criteria-based Marking Guide for Question 3: Influences exchange rates
Excellent
(Mark range: 7.5–10 marks) Satisfactory
(Mark range: 5–7 marks) Unsatisfactory
(Mark range: 0–4.5 marks)
• clear understanding of foreign exchange markets and how currency fluctuations will affect the investment decision
• correctly identifies the risks and advantages associated with foreign investment
• comprehensive discussion of all factors affecting PCC’s operations domestically and abroad
• indicative solutions/strategies are provided • some understanding of foreign exchange markets and how currency fluctuations will affect the investment decision
• correctly identifies some of the risks and advantages associated with foreign investment
• some discussion of all factors affecting PCC’s operations domestically and abroad
• some indicative solutions/strategies are provided • basic/no understanding of foreign exchange markets and how currency fluctuations will affect the investment decision
• does not identify the risks and advantages associated with foreign investment
• basic/no discussion of all factors affecting PCC’s operations domestically and abroad
• indicative solutions/strategies are not provided/ incorrect
Insert your answers to Question 3 below this line
End of answers to Question 3
Section B (25 marks)
Instructions to students
There are two (2) short-answer questions in this section. Answer all questions.
Question 1 Asset classes (15 marks | Word limit: 700 words)
LO5: Compare how the different asset classes are used and traded.
Assume you are a financial adviser. You have been approached by a ‘wholesale’ client who has accumulated sufficient investible funds to consider establishing their own personal investment portfolio. This client has now asked for a detailed report from you regarding investment options.
Your client has asked you to provide an analysis of each of the four asset classes below. Focus briefly on the current factors impacting each market, their anticipated returns, and the associated risks (if any) in each.
The four asset classes to consider are:
1. cash
2. fixed interest
3. equity (using the All Ords Index as your benchmark)
4. property (using the A-REIT Index as your benchmark).
Your answer an explanation of correlation (or non-correlation) between the asset classes (if any).
Conclude your answer with a forecast of which asset class overall you believe will provide the best returns for the period, justifying your opinion based on your forecast and associated justification.
(15 marks — 700 words)
Criteria-based Marking Guide for Question 1: Asset classes
Excellent
(Mark range: 11–15 marks) Satisfactory
(Mark range: 7.5–10.5 marks) Unsatisfactory
(Mark range: 0–7 marks)
• correct estimated percentage forecast of returns for each asset class is provided
• a comprehensive explanation of correlation of returns
• concluding statement about the best forecast is provided with
well-supported justification • a mostly correct estimated percentage forecast of returns for each asset class is provided
• a mostly correct explanation of correlation of returns
• concluding statement about the best forecast is provided with some justification • incorrect or incomplete estimated percentage forecast of returns for each asset class is provided
• little or no explanation of correlation of returns
• concluding statement about the best forecast is not provided or poor or no justification is provided
Insert your answers to Question 1 below this line
End of answers to Question 1
Question 2 Influence of Monetary and Fiscal Policy (10 marks | Word limit: 600 words)
LO2: Explain the role of intermediaries in financial markets.
LO4: Assess the changes and impact of government and monetary policy on the Australian financial markets.
It is critical to understand how governments and central banks react to domestic and international global events. Consider the following:
(a) In an overheating economy, what steps should the Reserve Bank of Australia take to stabilize the economy? In your answer, discuss issues which may impact the success of these measures.
(5 marks — 300 words)
(b) When an economy faces a sudden downturn, what action can the government take to alleviate this issue? In you answer define fiscal policy and discuss the primary fiscal policy tool used by the government. (5 marks — 300 words)
Note: You should build upon your answer to the Analysis task and the feedback provided by the marker.
Criteria-based Marking Guide for Question 2: Influence of Monetary Policy
Excellent
(Mark range: 7.5–10 marks) Satisfactory
(Mark range: 5–7 marks) Unsatisfactory
(Mark range: 0–4.5 marks)
• comprehensive outline of policy measures employed by RBA
• comprehensive outline of policy measures employed by the government
• clear understanding of the underlying concepts behind monetary policy in Australia
• clear understanding of the underlying concepts behind fiscal policy in Australia
• answer is well supported and explained with independent research including references • adequate outline of policy measures employed by RBA
• adequate outline of policy measures employed by the government
• clear understanding of the underlying concepts behind monetary policy in Australia
• clear understanding of the underlying concepts behind fiscal policy in Australia
• answer is supported and explained with some independent research including references • limited outline of policy measures employed by RBA
• limited outline of policy measures employed by the government
• basic/no understanding of the underlying concepts behind monetary policy in Australia
• basic/no understanding of the underlying concepts behind fiscal policy in Australia
• answer is not supported and explained with independent research including references
Insert your answers to Question 2(a)–(b) below this line
End of answers to Question 2(a)–(b)
END OF ASSIGNMENT