FNCE10001

Finance 1

ASSIGNMENT 2

Semester 1, 2014

Prepared by
Carsten Murawski

Department of Finance
Faculty of Business and Economics
 FNCE10001 Finance 1
Assignment 2
Semester One 2014

ADMINISTRATIVE ARRANGEMENTS

Due date: 11:59pm on Monday, 5 May 2014

Late Late submissions must be accompanied by a completed Request for

assignments: Special Consideration form. This form must be handed to the Commerce
Student Centre (FBE Building).

Late assignments, where approval for late submission has not been given,
will be penalised at the rate of 25% of the total mark per day, for up to 3
days, at which time a mark of zero will be given.

Extensions of Students who have been significantly affected by illness or other serious
time: circumstances during the semester may be eligible to apply for Special
Consideration.

The following website contains detailed information relating to who can

apply for Special Consideration and the process for making an
application:

http://ask.unimelb.edu.au/app/

Where to The Assignment Tool allows you to submit your assignment online from
submit: home or from any of the student labs on campus.

You can access the Assignment Tool by clicking on Assignment Tool in

the navigation menu from the LMS page for this subject. You will need to
submit your assignment electronically in MS-Word or PDF format.

You will need to submit your assignment electronically in PDF

format.

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Cover sheet: You should include your details on the first page of your assignment.
This will enable us to easily identify student submissions:

Subject Code and Name

Student Number
Full Name
Tutorial Date/Time
Tutor’s Name
Assignment Name or Number

Word limit: The word limit is 1,000 words. Assignments exceeding the word limit
may be penalised. The word limit does not include the abstract,
graphs/tables, footnotes or bibliography.

Marks: This assignment counts 10% towards the final mark in this subject.

ASSIGNMENT INSTRUCTIONS
The assignment must be your own work. Students are encouraged to discuss the
assignment and to share information sources. However, the writing of each student’s
assignment must be conducted separately and independently. Where use has been made of
the work of others (for example, through your reading of books, articles or webpages)
appropriate recognition must be given via quotation marks and referencing. Failure to give
such recognition is plagiarism and will result in the annulment of your mark for the
assignment. Other disciplinary action may also be taken.

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Essay presentation issues
Typing: Use either double spacing or 1½ spacing.

Grammar, Correct grammar, punctuation and spelling is expected.

punctuation and
spelling:

Develop a plan
Before you start working on your assignment, it is a good idea to write a brief plan. In this
plan, you list the topics you want to cover and the order in which you wish to discuss them.
Before you start writing you can adjust your plan so your argument flows properly and you
do not use ideas or concepts before you have explained them to the reader.

Use of graphs
To illustrate your answers where you believe this will assist understanding, use graphs.
Choose your graphs carefully and try to be precise – too many can make an answer hard to
follow. To use a graph correctly, you must:

Carefully label the graph – Each graph should be titled and all axes and curves should be
labelled. Lines and symbols should be clearly identified.

Discuss the graph – Discuss the graph in words and relate it to your essay.

Use of references: The Harvard System

References in the text give the author’s surname, the date of publication and, if a quote or
specific fact is referred to, the page number as well. For example: ‘In this section we
replicate the Fama and French (1993b) tests on our sample of Japanese stocks…’

The abbreviation ‘et al.’ may be used where there are more than three authors as follows:

‘See Chordia et al. (2005) for a discussion of market liquidity…’

When citing several references to support a particular point, list them chronologically and
separate them with semi-colons:

‘Financial economists have extensively studied the cross-sectional determinants of U.S. stock
returns (Merton, 1973; Ross, 1976; Fama & French, 1993).’

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How to cite references in your essay reference list or bibliography
A. BOOKS

Markowitz, H.M., 1991, Portfolio Selection. Blackwell Publishers, Cambridge, MA.

B. JOURNAL ARTICLES

Brau, J.C. and S.E. Fawcett, 2006, ‘Initial public offerings’, Journal of Finance. Vol.
61, pp. 399-436.

C. ARTICLES OR CHAPTERS IN BOOKS

Karolyi, G.A. and Stulz, R.M., 2003, ‘Are financial assets priced locally or globally’ in
Handbook of the Economics of Finance, edited by G.M. Constantinides, M. Harris and
R.M. Stulz, Elsevier: North Holland, Amsterdam.

D. NEWSPAPER ARTICLES

Byrne, Henry, ‘Short season spoils analysts’ concentration’. The Australian Financial
Review, 17 March 2006, p. 31.

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 FNCE10001_Assignment 2 Instructions

You are a first-year analyst at a top-tier investment bank in Melbourne. Your boss, a senior
banker, has received a text message from one of her clients, Rip Curl, the Torquay-based
surfing company, seeking help with raising additional funding. Specifically, Rip Curl would
like to raise AUD500 million of debt to fund an ambitious strategy expanding their business
overseas. They have heard that interest rates on government bonds in Switzerland are
particularly low right now and would like to raise the debt by issuing bonds in Switzerland to
benefit from the low interest rates there. Rip Curl would like to know from your boss what
she thinks about this idea.

Your boss asks you to prepare a short note evaluating Rip Curl’s ideas. Your note should
address the following questions:

1. Is the issuance of bonds in Switzerland by Rip Curl going to be feasible?

2. While interest rates in Switzerland are indeed lower than in Australia, other factors have
to be taken into account when evaluating the possibility of issuing bonds there. What is
the major risk of issuing bonds overseas?

3. Which other financing alternatives are available to Rip Curl? Of those, which option is
likely to most attractive and feasible option for Rip Curl?

MAXIMUM WORD LIMIT

1,000 words

ASSESSMENT CRITERIA – Total Marks Available: 10

• Demonstrated knowledge of the characteristics of debt and equity markets

• Research effort (including use of various sources)
• Overall presentation of the work

Marks will be allocated as follows:

2 Marks – Presentation of the report

8 Marks – Content of the report (demonstrated knowledge of the topic)