Financial Management Catch Up

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1. After placing $8,000 in a savings account paying annual compound interest of 8%, calculate the amount that will accumulate if it is left for 8 years?

2. You have just introduced “must have” headphones for the iPod. Sales of the product are expected to be 20,000 units this year and are expected to increase by 16% annually in the future. What are the expected sales in each of the next three years? If the 20,000 units were expected to increase by 18% a year, what are the expected sales next year for this product?

3. What is the present value of a perpetual stream of cash flow that pays $80,000 at the end of one year and grows at a rate of 5% indefinitely? The rate of interest used to discount the cash flows is 10%. What is the present value of the growing perpetuity?

4.What is the present value of a $650 perpetuity discounted back to the present at 10%? What is the present value of the perpetuity?

5.

You are given three investment alternatives to analyze. The cash flows from these three investments are as follows:
Investment table

What is the present value of investments A, B, and C if the appropriate discount rate is 10%?

6. Syntex is considering an investment in one of two stocks. Given the information that follows, which investment is better based on the risk (the standard deviation) and return? Given the information in the table, what percent is the rate of return for Stock B?

Commont Stock A B Table

7. The common stock of Plaxo Enterprises had a market price of $9.45 on the day you purchased it just 1 year ago. During the past year, the stock paid a dividend of $1.43 and closed at a price of $11.66. What rate of return did you earn on your investment in Plaxo’s stock? The rate of return you earned on Plaxo’s stock is what percent?

8. Caswell Enterprises had the following end-of-year stock prices over the last five years and paid no dividends.

TimeCaswell1$1229374658

  • Calculate the average rate of return for each year from the above information.
  • What is the arithmetic average rate of return earned by investing in Caswell’s stock over this period?
  • What is the geometric average rate of return earned by investing in Caswell’s stock over this period?
  • Considering the beginning and ending stock prices for the five-year period are the same, which type of average rate of return best describes the annual rate of return earned over the period (arithmetic or geometric)?
  • The annual rate of return at the end of year 3 is what percent?

9.  On December 5, 2007, the common stock of Google, Inc. (GOOG) was trading at $698.51. One year later, the shares sold for $301.99. Google has never paid a common stock dividend. What rate of return would you have earned on your investment had you purchased the shares on December 5, 2007? The rate of return you would have earned is what percent?

 
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Using foreign exchange knowledge of financial market to solve assignment problem

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BAFI1002 Financial Markets – Group Assignment (Stage 2)

Semester 1, 2021

 

Due Date: 9th May (Friday Week 10), 10 PM (Melbourne Time)

Weighting: 20%

Formatting & Presentation [2 marks]

The report must be professionally presented using Times New Roman, size12 font, double-spaced for the main text, and single spaced for tables, figures & appendices. Figures and graphs should be clearly labelled and numbered. Any information obtained from sources external should be referenced according to AGPS Harvard Style or APA style. A word limit of maximum of 1700 words applies with a tolerance of + 10%, excluding appendices and tables.

 

Overview

Your team works for a renowned FX trading company, Snowy River Ltd. The company specialises in trading major currencies such as Australian Dollar (AUD), British Pound (GBP), Canadian Dollar (CAD), Euro (EUR), Japanese Yen (JPY), New Zealand Dollar (NZD), Swiss Franc (CHF) and US Dollar (USD). The company also trades various foreign exchange related derivatives for its clients. In addition, it provides general advice to other clients who trade for themselves. The firm’s chief trading executive, Pete Fernandes, has requested your team’s expertise in trading foreign currencies in order to improve firm’s trading strategy and profits. You have been asked to prepare a detailed report in this regard. In your report you must address the following questions:

Scenario 1 [5 marks]

You have been asked to select one of the three market views developed by your group in stage 1. Using this market view, devise a speculation strategy that enables your organisation to take advantage of your predicted changes in the exchange rates. You should specify which currencies you will buy or sell.  As part of your strategy you must create a portfolio as of 3rd of May 2021. This portfolio will comprise of the currency pair analysed in your market view.

The senior management has allocated you 400,000,000 units of currency as the initial balance for your speculation strategy if you are speculating on AUD, GBP, CAD, EUR, NZD, CHF or USD and 25,000,000,000 units if you are speculating on JPY. For instance, if you are speculating on AUD/EUR and decided to short the EUR then you have been allocated 400,000,000 EURs for this purpose. The corresponding long position should be calculated using bid/ask rates provided in Table 1. Please note that you must speculate on one currency pair only (two currencies). You must then take long and short positions as of 3rd of May 2021 in the respective currencies in accordance with your market view as a price taker [2.5 Marks]. These long and short positions will constitute your portfolio’s current opening position. Based on your initial position you must estimate the opening AUD value of your portfolio using the mid rates in Table 1 and update your position summary table below with your speculative position [2.5 Marks]. Mid rate = (bid rate + ask rate)/2

 

 

Comm / Terms Bid Ask Mid
AUD/USD 0.7161 0.7163 0.7162
AUD/EUR 0.6069 0.6073 0.6071
EUR/AUD 1.6471 1.6474 1.6473
AUD/GBP 0.5470 0.5473 0.5472
GBP/AUD 1.8275 1.8280 1.8278
AUD/JPY 75.75 75.78 75.77
EUR/USD 1.1795 1.1799 1.1797
GBP/USD 1.3087 1.3092 1.3090
USD/JPY 105.78 105.81 105.80
EUR/GBP 0.9010 0.9015 0.9013
EUR/JPY 124.79 124.83 124.81
GBP/JPY 138.45 138.50 138.48
AUD/CAD 0.9432 0.9440 0.9436
EUR/CHF 1.0750 1.0759 1.0755
GBP/CHF 1.1929 1.1938 1.1934
USD/CHF 0.9115 0.9117 0.9116
USD/CAD 1.3175 1.3179 1.3177
NZD/USD 0.6539 0.6542 0.6541

 

Table 1: Exchange rates on April 22, 2021. Mid rate = (bid rate + ask rate)/2

 

Currency

 Opening Position (current) Position in AUD (Current) Net

Trades

 Net Position (Expected) Net Position in AUD (Expected) Change in Position (AUD)
AUD            
CAD            
CHF            
EUR            
GBP            
JPY            
NZD            
USD            
Net Position (AUD)            

 

Table 2: FX portfolio position summary

Note: Indicate long positions with a positive sign and short positions with a negative sign (e.g. a short position of 45,000,000 GBP should be indicated as –45,000,000). Mid rate = (bid rate + ask rate)/2

 

Question 2 [7 marks]

Senior management is concerned about the recent developments in the financial markets. There is a general belief that market volatility has been relatively high, yet it might climb even higher than expected in the near future due to the current global health crisis. You have been asked to conduct a thorough risk assessment of your speculative positions undertaken in question 1. For this purpose, the firm’s foreign currency analyst has provided you with the 2-month benchmark rates of these major currencies:

 Currency Benchmark Interest Rates 2-Month Benchmark Rates

(%)
AUD 2-Month Bank Bill Swap Rates 0.095
GBP 2-Month GBP LIBOR 0.073
CAD 2-Month Treasury Bills 0.150
EUR 2-Month Euro LIBOR -0.495
NZD 2-Month Bank Bill Yields 0.270
CHF 2-Month CHF LIBOR -0.744
JPY 2-Month JPY LIBOR -0.059
USD 2-Month USD LIBOR 0.205

Table 3: Benchmark interest rates on April 23, 2021.

 

Using the interest rates above, calculate the implied forward bid, ask and mid rates for the currency pairs in Table 4 (next page) [3 Marks]. You must then calculate the value of your FX portfolio at the end of June using the calculated bid/ask rates. Report the expected value of your position in each currency in the position summary in Table 2 [2 Marks]. Finally, you must calculate expected profit/loss (gain or loss over the opening position) on your portfolio in AUD [1 Mark]. The AUD value of the net expected position must be calculated using the estimated mid rates.

Comm / Terms Bid Ask Mid
AUD/USD      
AUD/EUR      
EUR/AUD      
AUD/GBP      
GBP/AUD      
AUD/JPY      
EUR/USD      
GBP/USD      
USD/JPY      
EUR/GBP      
EUR/JPY      
GBP/JPY      
AUD/CAD      
EUR/CHF      
GBP/CHF      
USD/CHF      
USD/CAD      
NZD/USD      

Table 4: Implied forward rates at the end of June 2021. Mid rate = (bid rate + ask rate)/2

Explain your final portfolio position to the senior manager. Given the implied forward rates for June, discuss whether your speculative positions will generate profits for the company. You must explain ending positions for each currency (and it’s AUD value using mid rates) in your portfolio? Do your portfolio have any exposure to exchange rate risk? What recommendations, if any, will you make to the senior management? [1 Mark].

 

 

 

 

 

 

 

 

 

Formatting & Presentation [2 marks]

The report must be professionally presented using Times New Roman, size12 font, double-spaced for the main text, and single spaced for tables, figures & appendices. Figures and graphs should be clearly labelled and numbered. Any information obtained from sources external should be referenced according to AGPS Harvard Style or APA style. A word limit of maximum of 2000 words applies with a tolerance of + 10%, excluding appendices and tables.

Submission

1. Students are required to register their groups online via Canvas.

1. Go to the course site on Canvas. Submit your assignment under the submission point. Only one submission is required per group. It’s the responsibility of the group members to ensure that the assignment is submitted on time.

1. The report must have the university prescribed cover sheet and the following details:

· Student names and student numbers of those who have contributed to the report

· FX Session attended

· Assignment Group Number

· Name of FX Session Instructor

Feedback & Marking

A rubric with marking criteria will be made available on Canvas. You are strongly encouraged to ask questions during the FX sessions and other learning activities so that you can obtain feedback on your understanding of the concepts and issues being discussed. FX sessions running in week 8 will focus specifically on the discussion of this assignment and related concepts. Questions specific to this assessment should be addressed to your session instructor . Contact details can of all instructors can be found on Canvas

Late Submissions

Late submissions of assignments without special consideration or extension will be automatically penalised at a rate of 10% of the total marks available per day (or part of a day) late. For example, if an assignment is worth 20 marks and it is submitted 1 day late, a penalty of 10% or 2 marks will apply. This will be deducted from the assessed mark. Assignments will not be accepted if more than five days late, unless special consideration or an extension of time has been approved.

Special consideration is available for unexpected circumstances outside students’ control. For more. More information regarding special consideration is available at https://www.rmit.edu.au/students/student-essentials/assessment-and-exams/assessment/extensions-of-time-for-submission-of-assessable-work

 

BAFI1002 Financial Markets – Group FX Assignment (Stage 2)

 
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REVISED Investment Problems

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Xytex Products just paid a dividend of $1.92 per share, and the stock currently sells for $38. If the discount rate is 15 percent, what is the dividend growth rate? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places. Omit the “%” sign in your response.)

 

 

You are going to value Lauryn’s Doll Co. using the FCF model. After consulting various sources, you find that Lauryn has a reported equity beta of 1.6, a debt-to-equity ratio of .4, and a tax rate of 40 percent. Based on this information, what is Lauryn’s asset beta? (Do not round intermediate calculations. Round your answer to 2 decimal places.)

 

 

JJ Industries will pay a regular dividend of $.65 per share for each of the next four years. At the end of the four years, the company will also pay out a $71 per share liquidating dividend, and the company will cease operations. If the discount rate is 8 percent, what is the current value of the company’s stock? (Do not round intermediate calculations. Round 

 

Able, Baker, and Charlie are the only three stocks in an index. The stocks sell for $55, $312, and $92, respectively. If Able undergoes a 3-for-4 reverse stock split, what is the new divisor? (Do not round intermediate calculations. Round your answer to 5 decimal places.

 

Star Light & Power increases its dividend 2.3 percent per year every year. This utility is valued using a discount rate of 10 percent, and the stock currently sells for $46 per share. If you buy a share of stock today and hold on to it for at least three years, what do you expect the value of your dividend check to be three years from today? (Do not round intermediate calculations. Round your answer to 2 decimal places. Omit the “$” sign in your response.)

 
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Excel Exam

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MGMT 364 Midterm Exam Spring 2021

 

Name:__________________________

 

 

Problem 1: Amazon – Online Sales

Amazon sells books, music, and many other items over the Internet and is one of the pioneers of online consumer sales. Amazon, based in Seattle, Washington, started by filling all orders using books purchased from a distributor in response to customer orders. As it grew, the company added warehouses, allowing it to react more quickly to customer orders. In 2009, Amazon had about 20 warehouses in the United States and another 30 in the rest of the world. It uses the U.S. Postal Service and other package carriers such as UPS and FedEx to send products to customers. Outbound shipping-related costs at Amazon in 2009 were almost $2 billion.

With the Kindle, Amazon has worked hard to increase sales of digital books. As of 2009, Amazon offered more than 460,000 books in digital form. The company has also added a significant amount of audio and video content for sale in digital form.

Amazon has continued to expand the set of products that it sells online. Besides books and music, Amazon has added many product categories such as toys, apparel, electronics, jewelry, and shoes. In 2009, one of its largest acquisitions was Zappos, a leader in online shoe sales. This acquisition added a lot of product variety. According to the Amazon annual report, this required creating 121,000 product descriptions and uploading more than 2.2 million images to the Web site! In 2010, another interesting acquisition by Amazon was diapers.com. Unlike Zappos, this acquisition added little variety but considerable shipping volumes.

Several questions arise concerning how Amazon is structured and the product categories it continues to add:

 

1. What advantages does selling books via the Internet provide over a traditional bookstore? Are there any disadvantages to selling via the Internet?

 

 

2. Should Amazon stock every product it sells?

 

 

3. What advantage can bricks-and-mortar players derive from setting up an online channel? How should they use the two channels to gain maximum advantage?

 

 

4. What advantages/disadvantages does the online channel enjoy in the sale of shoes /diapers relative to a retail store?

 

 

 

5. For what products does the online channel offer the greater advantage relative to retail stores? What characterizes these products?

 

 

 

Problem 2.

 

The Green Company is a retailer of gourmet bottled pickles that purchases its products from Whole, a gourmet food manufacturer. Green buys units (from Whole) at a price of $15 per unit and sells them to customers at $45 per unit. Currently Whole produces to Green’s order and delivers all requirements at the start of the period. Leftover inventory at the end of the season will be donated to a charity organization for free. The demand is lost when Green does not have inventory. Whole’s production cost is $10 per unit.

 

Demand(units) Probability
100 0.2
200 0.3
300 0.2
400 0.3

 

 

 

1. Given the current information, how many units of products should Green stock to satisfy demand? What is the associated profit for Whole and Green and for the supply chain in total?

 

 

 

2. If Whole and Green were one integrated company, how many units would be stocked? What is the associated profit for the supply chain?

 

 

 

 

3. Why is there a discrepancy between the previous two questions? What steps would you recommend to coordinate this supply chain?

 

 

Problem 3.

 

The First Bank of Lafayette has a common office for mortgage and commercial credit processing. The process involves several departments: data collection, data verification, loan pricing, loan closing, and loan maintenance. For each of the departments, there are a number of clerks working in parallel. All requests pass through each of the 5 stages.

 

Stage Number of Clerks Set-up Time Processing Time
Data Collection 6 20 minutes 10 minutes
Data Verification 4 25 minutes 3 minutes
Loan Pricing 4 15 minutes 10 minutes
Loan Closing 4 4 minutes 20 minutes
Loan Maintenance 6 10 minutes 20 minutes

 

 

 

Data Regarding orders received shows 40 orders per day for mortgage processing and 20 orders per day for commercial credit. Given that all orders are processed in order of arrival and that every order has to go through all 5 stages, provide the average lead time for First Bank to complete the process. Assume 8 hours of work per day, 5 days per week, and 50 weeks per year.

 
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