FINM2002 7041 Assignment Semester 2 2019 PDF

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Download FINM2002 7041 Assignment Semester 2 2019 PDF

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FINM2002 DERIVATIVES / FINM7041 APPLIED DERIVATIVES ASSIGNMENT

1. This assignment accounts for 25% of students’ final grade for FI NM2 0 0 2De r i va t i v e sa n dFI NM7 04 1Ap p l i e dDe r i v a t i v e s ; 2. The assignment is to be undertaken either individually or in groups of no more than 4 students. Please note that FINM2002 can only collaborate with FINM2002 students and FINM7041 students can only collaborate with FINM7041 students; 3. Students must email [email protected] by 4pm Friday the 23rd of August with group members. You should send one email per group with each member’s name and student number. Please cc the other group members on the email. 4. Students are to complete all questions for the assignment; 5. Each assignment should include the coversheet located in the assignment folder on Wattle; 6. Answers to questions MUST be typed; 7. All questions regarding the assignment must be directed to the lecturer, Stephen Sault, as all tutors have been told not to answer questions. This will ensure fairness as all students will receive the same advice when asking questions; 8. There is no need for a separate reference section. Please reference sources through the text in the assignment. For example, “As XXXX stated on 4 August…” and “As per the XXXX website…” 9. If assignments are completed by a group, only one copy of the assignment is to be submitted; and, 10. The assignment is to be submitted in the FI NM2 0 02 De r i v a t i v e s assignment box for FINM2002 students and the FINM7041 Applied Derivatives assignment box for FINM7041 students outside the Research School of Finance and Applied Statistics Office no later than 1pm on Thursday 19 th September 2019. Late submissions will not be accepted, with a mark of zero being awarded for late submissions.

FINM2002 Derivatives / FINM7041 Applied Derivatives This assignment requires students to prepare a report which assesses the hedging strategy of a company. You will need to choose a company whose shares are traded on the Australian Securities Exchange (ASX) that has a substantial exposure to exchange rate risk. You will then need to conduct research on this company so that you can answer the questions below. Be careful in choosing your company, as the assignment will be more straightforward to complete if you can identify that the company has a large exchange rate exposure. If you can’t find a lot of information, you should choose a different company. For this assignment students must submit a typed report which separately addresses each of the three questions below. This report must be no longer than 8 pages, single sided, 2.5cm margins on all sides, double spaced with size 12 Times New Roman font. Question 1 (5 Marks) How does exchange rate risk impact the company you have chosen? Provide as much detail as you can. Think about how exchange rate risk could impact the cash flows of the company, and whether the risk is short term, or long term. Question 2 (7 Marks) Identify what factors will affect the exchange rate over the next year. You should provide a forecast for the value of the currency (if the main risk is what will happen to the value of the Australian dollar, you should provide a forecast for the value of the AUD over the next year). To ensure you make an informed decision, you will need to read a number of financial newspaper/online articles to help you come to your decision. In your answer you will need to provide a convincing argument that is supported by research you have conducted. Question 3 (13 Marks) The decision is now up to you. Provide an exchange rate hedging recommendation for the company. In your answer you will need to provide a convincing argument that is supported by research you have conducted in question 2 (this includes how exposed the company is to exchange rates; your research on the future direction of exchange rates etc). High marks will be awarded to those answers which convince me as to their strategy.

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