MAF202: Money and Capital Markets - Faculty of Business and Law - Accounting and Finance Assignment Help

Assignment Task:

PART A. You are required to answer ALL questions. 

Question 1 (this question has two parts, (a) and (b)) 

Australian Taxation Office allows for dividend imputation at the company tax rate of 30%. An investor’s marginal tax rate is 43.5% (including the Medicare Levy). The investor receives a 40% partly franked dividend of $500. 

a) Briefly explain the dividend imputation system in Australia

b) Calculate the tax payable by the investor showing all the steps in reaching the answer. 

Question 2 (this question has two parts, (a) and (b)) 

A not-for-profit organisation has designed a new social services program that is showing promising results. The government will pay for the program, but only if the service delivers the expected outcomes. The service provider does not have the working capital to deliver the services unless it is paid in advance, and cannot take the risk that it will not be paid at all if the expected outcomes are not met. 

a) What type of capital markets instrument may be appropriate in this situation and how does it work? 

b) Are there any drawbacks the service provider needs to be aware of before committing to such a transaction? 

Question 3 

A managed fund is to restructure its balance sheet through the sale of $7 million of corporate bonds that mature on 30 September 2018. The bonds pay a fixed half-yearly coupon of 5.50 per cent per annum. Settlement date for the sale is 17 February 2014. Current yields on similar bond issues are 8.50 per cent per annum. You are required to calculate: 

a) n (number of periods)

b) i (current yield) 

c) C (coupon payment)

d) k (fraction of elapsed interest period since the last coupon payment)

e) P (price at which the bonds will be sold) 

Question 4 (this question has two parts, (a) and (b)) 

(a) Corporation ABC needs money for six months to finance refurbishment of its office space. Briefly describe two methods in which this can be achieved. 

(b) Corporation ABC obtains a commercial mortgage loan of $425,000 from its bank, at 8% p.a., payable over 7 years by monthly instalments Calculate n (number of loan instalments), i (interest rate) and R (the instalment amount). 

Question 5 (this question has two parts, (a) and (b)) 

Due to liquidity concerns, a large funds manager has forecast that it will need to sell at least $100 million worth of shares at the end of the next quarter. The fund’s manager has a policy that requires it to hedge the risk that the share price may fall over that period using a share index futures contract. 

a) Define a futures contract how is it different from a forward contract. 

b) Given the above scenario, what futures market transactions will the funds manager make today and in three-month's time? 

Question 6 (this question has two parts, (a) and (b)) 

An electronics manufacturer in Singapore is exporting goods to Australia. In order to ascertain the firm’s exposure to foreign exchange risk the company  needs to calculate the AUD/SGD cross-rate. An FX dealer quotes the following rates: 

USD/AUD 1.2480 - 83

USD/SGD 1.3197 - 202 

a) Explain from the perspective of the dealer what the USD/SGD quote indicates, transpose the quotation. 

b) Calculate the AUD/SGD cross rate. 

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