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Assessment Task 1 Instructions:  Assessment Task 1 is the take-home mid-term test

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Assessment Task 1

Instructions: 

Assessment Task 1 is the take-home mid-term test. This is an open book test requiring short answers to questions based on Course topics in Week 1 to 5. Your answer may use a bullet point style to frame the answer.

 

There is a total of 5 questions in this assessment. Each question is worth 20 marks for a total of 100 marks for the test. You must attempt an answer to all parts of each question.

 

Each question will have 3 parts, Part a (4 marks, 60 words), Part b (6 marks, 90 words) and Part c (10 marks, 150 words). The marks reflect the difficulty of the question and are a guide to the number of words to allocate to each part.

 

Part a will ask for description, explanation or a demonstration of understanding of key issues introduced across Course topics in Week 1 to 5, inclusive. Part b will focus on application of knowledge and key skills that have been presented and/or discussed during the topic. Part c requires an evaluation of the topic material that might include a judgement or evaluation about an issue introduced in the question, development of an idea or a formulation of a future scenario for the issue.

 

You are free to use any resource available in the topic material, additional material in the RMIT library or other independent research.

 

The total word limit for your answers to the Assessment Task 1 is 1,500 words (Approximately 300 words per question). A 15-mark penalty will be applied for tests which exceed the total word limit by more than 10% (i.e. 1,600 words).

 

Assessment Task 1 questions will be available on Canvas under Assignments>Assessment Task 1 from 6 September 2021 at 12:01am. Your assessment is due for submission on 12 September 2021 at 11:59pm (End of Week 7).

 

The answer to each question should be input into the text entry area in the assessment.

 

 

Question 1  (20 pts)

Part a) List and explain in your own words 4 risks of international bonds.

Part b) The bid/ask rates for USD/Yen is 109.68/109.70, USD/RUB is 74.11/74.14 and the AUD/USD is 0.7160/0.7162. Calculate the bid-ask spread in percentage terms for these two currencies. Suggest and explain four reasons why the bid-ask exists.

Part c) Explain the difference between Yankee stock offerings and American Depository Receipts. Give an example of an Australian company that has ADR’s. Why are they attracted to this market?

 

 

Question 2  (20 pts)

 

Part a) Provide a description of cryptocurrencies including your understanding of how these currencies work and provide an example of one cryptocurrency available for investment.

Part b) Analyse cryptocurrencies by including a list of the advantages and disadvantages of cryptocurrencies.

Part c) Develop and express your opinion about the future of cryptocurrencies. This should include the role that cryptocurrencies will play in the economy in the future, stability and the acceptance of cryptocurrency and the role of regulation.

 

 

 

Question 3  (20 pts)

 

Part a) Casu et. al. (2015, p 461) argues that here were three different crises in the European Union, a banking crisis, sovereign debt crisis and an economic growth crisis. Describe and explain the links between each of these crises.

Part b) List 6 reasons for international banking services being established. Give an example of an Australian Bank providing banking services in the international market and the reason that it might have been established. 

Part c) Describe the major regulators in the US banking markets. Describe and critique areas that these regulators might work together to resolve significant issues in the US Banking market.

 

 

Question 4  (20 pts)

 

Part a) Identify and describe four important risks of a Bank.

Part b) Calculate the Basel II capital requirement for Westpac Bank of the following three transactions with an A-rated retailing conglomerate.

1. A short position in a thirteen-month butter commodity option with notional principal of $25 million that is worth -$1.5 million (i.e. Westpac is out-of-the money).
2. A five-year interest rate swap with notional principal of $400 million that is worth $11.5 million (i.e. Westpac is in-the money).
3. A six-month forward foreign exchange rate contract with notional principal of $210 million that is currently worth $0.5 million (i.e. Westpac is in-the money).

Part c) Following the global financial crisis the Basel Committee for Banking Supervision introduced the Net Stable Funding Ratio (NSFR) and the Liquidity Coverage Ratio (LCR).  Describe these two ratios and outline a justification for their introduction. 

 

 

Question 5  (20 pts)

 

Part a) How do hedge funds use leverage to produce high returns? Provide an example of this leverage.

Part b) Analyse the growth in Australian superannuation funds using a timeline that details the history of participation in superannuation, significant legislative and rule changes, regulatory changes, market changes and other events.

Part c) Will the compound annual growth of the asset value of superannuation funds in Australia increase, stay the same or decrease over the next 10 years? Provide a balanced argument (points for and against), that supports your answer.