FINC5090 - Finance in Global Economy
Group Assignment Outline
Semester 2, 2023

Instructions

1. Read the instructions carefully.

2. This assignment is worth 25% of total marks.

3. The DUE DATE is 15 OCTOBER 2023. The submission link will stop accepting submissions at 23:59 on the submission date.

4. DO NOT send your work via email if you miss the deadline.

5. Plagiarism is a serious academic offense and will result in zero marks and disciplinary action against all group members.

6. Make sure you write correct Student IDs of all team members. Student IDs uniquely identify authors, and it is important that the marker knows the authors of an assignment.

7. The pages must be numbered.

8. The header (first) page of your assignment MUST CONTAIN CORRECT STUDENT IDs of all team members and may contain your names.

9. Simply answer the questions (from page two onwards), and there is no need to write unnecessary sections like abstract, table of contents, executive summary, etcetera.

10. Answer each question on a new page. For instance, Task 1 - question 1 on page 2, Task 1 - question 2.i on page 3, and so on.

11. The referencing style is APA. If you do not know what this referencing style looks like, see Google Scholar. If you need any help, you can read manuals like the Chicago Manual of Style.

12. Write in single-spaced, Times New Roman Font, font size 12. The page margins should be 2.5cm (top, bottom, left and right).

13. The word limit will be strictly applied. The project’s pages are prized real estate, so use them wisely.

14. Submit your assignment in PDF format only.

15. IMPORTANT: You should not present a newspaper-style story. This task is aca demic work, and your work should reflect the diligence that accompanies that kind of work. Any statement that is not a fact must be accompanied by a citation or must be based on your analysis.

Task 1

i) AUD/USD

ii) AUD/JPY

iii) AUD/EUR

iv) AUD/GBP

v) AUD/CAD

1. For each currency pair, rank the banks based on their eagerness to sell and buy.

2. Assume the following cost structure:

i) No transaction costs.

ii) A flat fee of AUD 20 is charged by each bank.

iii) Fee of {AUD 10 + 0.35%[Amount transacted - AUD 1,000]}.

2.a) Is there an arbitrage opportunity? If yes, explain. If no, explain.

2.b) If there is one (or more), then how large the transaction amount needs to be? Dis cuss the role played by the transaction costs.

Task 2

Your team works for a strategic consulting firm that provides its expertise in macro- financial issues to multinational companies. Recently, AAA Limited hired your firm for its services with a specific issue in mind. AAA Limited’s customers are based in the US and Canada. AAA Limited’s manufacturing plants are in Brazil, Indonesia, and India.

After the devastating economic effects of the Global Financial Crisis in 2008, the US Federal Reserve implemented its quantitative easing (QE) program to rejuvenate the domestic economy. AAA Limited asked your team to provide a brief to understand how the US QE operations will affect its revenue and manufacturing.

[Hint: Your may start here and here.]

Task 3

ABC Private Limited is a private company that operates on Crusoe Island. The Chief Executive Officer (CEO) of the company is keen on business expansion, which requires more capital. Crusoe Island’s economy is small, and the CEO posit that the capital

ABC Limited can raise locally will not be enough in the long term for the kind of expansion he has in mind. A team of senior executives came to the conclusion that the company should go public. The team also narrowed down the choice of two exchanges for listing: the National Stock Exchange (BSE), Bombay, India, and the Shanghai Stock Exchange (SSE), Shanghai, China. The listing requirements of the BSE and SSE are the same.

ABC Private Limited has solid fundamentals. As a last step of the process, you and your team are working to understand the best of the countries that will lead to value maximization in the long term. Thus, your analysis should have a macro focus and should link how country-level fundamentals may interact with firm fundamentals. From an operational point of view, ABC will shift its operations to either India or China.

Your team is tasked by the CFO to determine whether to list ABC Private Lim ited on the BSE (India) and the SSE (China). Both countries can provide the required amount of capital, labor, and other resources but differ on multiple dimensions, which include:

i. Foreign Exchange Regimes

ii. Country and Political Risk

iii. Infrastructure

iv. Human Capital and Demography

v. Legal System and Corporate Governance

vi. Property Rights

1. OECD data library

2. Our World in Data

3. Polity IV

4. Notre-Dame ND-Gain

5. International Monetary Fund

6. World Bank

7. United Nations

There is a lot of scope for your team to decide on what i)-vi) is/are and how you are going to measure i) vi) using data from 1-7. This recommendation should be analytically judgmental and evaluative. When your work is focused on one country, you need at least to take into account the issues and the dynamics in the other country. 

Write-up limit: up to 3,250 words.