MAF101 – Problem Based Written Assessment

Description

This assignment is a problem-based assessment which requires students to take part in a group exercise of critical thinking and problem solving of real-life financial issues.

Specific Requirements

Question 1 (30 marks):

Tim Durant is an Australian professional basketball player in the Australia Basketball league. He is one of the league’s most prolific scorers and has been called the best overall player. After completing his last contract with his current team in June 2022, Tim is now free to sign with any team in the league.

Burwood-101, one of the most widely supported basketball clubs in the Australia Basketball league, is willing to acquire Tim Durant to help the team become a championship contender for the next season. Burwood-101 has provided the following offer to Tim with three different options.

Option 1: A three-year contract, with an annual salary of $502,000, paid annually (i.e., one payment at the end of each year).

Option 2: A three-year contract, with an annual salary of $490,000, paid monthly (i.e., 12 equal payments p.a., and each payment will be paid at the end of each month).

Option 3: A three-year contract, with an annual salary of $489,000, paid fortnightly (i.e., 26 equal payments p.a., and each payment will be paid at the end of each fortnight).

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Assuming you are the financial adviser for Tim Durant, answer the following:

• What concept will you apply to assist Tim in choosing between these three options? Explain how this analysis will help Tim in making a better

(200 words (+/- 10%) for Q1 Part (1); Including in-text citation) (6 marks)

• If the current interest rate is 5%, calculate the present value and future value for all three Based on your estimation, which option would you recommend Tim to accept?

(15 marks)

• If Tim decides to choose option 1 (i.e., annual taxable income = $502,000), based on the following Australia tax rate table, estimate Tim’s annual after-tax income (excluding the Medicare levy).

(2 marks)

Table 1: Australia 2021-2023 income tax rates

• Tim has also received another offer from a Canadian Basketball club in the Alberta province. The club provides him with a three-year contract with an annual salary of 520,000 Canadian dollars (CAD) (i.e., annual taxable income = $520,000CAD). The Canadian government currently charges two types of income taxes to the individual taxpayer – the federal income tax and the provincial income tax; both are estimated based on the taxpayers’ annual taxable income and the following Canada tax rates tables. Assuming the exchange rate between the Australian dollar and the Canada dollar is 1 (i.e., equal value):
• Estimate Tim’s annual after-tax income if he accepts the offer from the Canadian Basketball club in the Alberta (5 marks)
• Assuming everything else remains the same, based on your after-tax income calculation from part (3) and part (4), which offer should Tim accept? The Australian club’s offer (i.e., offer 1) or the Canadian club’s offer? Explain.

(2 marks)

Table 2: Canada 2022 Federal income tax rates

 Table 3: Canada 2022 Provincial (Alberta) income tax rates

Question 2 Part A (32 marks):

Access Morningstar Datanalysis Premium via the Deakin library (refer to the MAF101 Question 2 step- by-step instructions document). Download onto a spreadsheet the adjusted month-end closing stock prices for Woolworth (ASX code: WOW), Telstra (ASX code: TLS) and JB Hi-Fi (ASX code: JBH)

for the previous 25 months ending 30/06/2022 onto a MS Excel spreadsheet. Use the downloaded data and perform the necessary calculations to answer the following questions:

• Using the closing stock price data, calculate the monthly returns, average monthly return, variance and standard deviation for these three companies over the selected sample

(12 marks)

• Do these average monthly return figures for these three companies appear justified given the nature of the business, the overall current market conditions over the past two years, and the industrial sectors within which each of these companies operates? Explain.

(600 words (+/- 10%) for Q2 Part (2); Including in-text citation) (10 marks)

• Based on your estimated value in Question 2 Part (1), which company has the highest average return? Which company has the highest total risk? Does the company with the highest total risk also have the highest return? Does the risk and return relationship hold in this case? (6 marks)
• If you construct a portfolio that contains all these three stocks, what is your expectation about the risk of the portfolio relative to the risk of each of these Individual stocks? (4 marks)

Question 2 Part B (20 marks):

Go to Yahoo Finance www.au.finance.yahoo (refer to the MAF101 Question 2 step-by-step instructions document) and download the adjusted month-end closing value of the ASX All Ordinaries Index (AORD) for the previous 25 months ending 30/06/2022. Perform necessary calculations to answer the following questions:

• Calculate and explain the correlation between (i) WOW and the market, (ii) TLS and the market, and (iii) JBH and the market over the (12 marks)
• Calculate the Beta of each of these three companies. If you construct a portfolio with 50% of your investment in WOW, 26% invested in TSL, and 24% invested in JBH, what is the Beta of this portfolio? (8 marks)

Question 3 (14 marks):

Conduct a short research report on cryptocurrency. Structure your report by answering the following questions: What is cryptocurrency? What are the risks and returns related to cryptocurrency? What are ‘initial coin offerings’ (ICP)? What are the reasons to own/not own cryptocurrency?

(800 words (+/- 10%) for Q3; Including in-text citation) (14 marks)

*Note for Question 3*:

The marking of this part will be based on research quality. Students need to undertake comprehensive research using several available resources. Each group needs to cite at least three scholarly references as evidence of their research. Failing to reach this minimum level will result in losing marks. Scholarly references include book chapters, articles published by mainstream media (paper press and/or website resources) and peer-reviewed journal articles. Wikipedia or Investopedia CAN NOT be used as an academic reference.

Assignment presentation and referencing (4 marks)

Professional presentation is required. Your report (word document) must include:

• Cover page: including group number, student names and student IDs.
• Table of contents: indicate each part, their sub-sections and relevant page
• Body/content of the assignment: all parts should be answered in
• Reference list: Harvard referencing
• Appendix (optional).

You should also upload one excel file showing your data and calculations for Question 2.

Learning Outcomes

This task allows you to demonstrate achievement towards the unit learning outcomes. The ULOs are aligned with specific graduate learning outcomes – that is, the skills and knowledge graduates are expected to have upon completion of their studies – and this assessment task is an important tool in determining achievement of those outcomes.

If you do not demonstrate achievement of the unit learning outcomes, you will not be successful in this unit.

It is good practice to familiarise yourself with the ULOs and GLOs as they provide guidance on the knowledge, understanding and skills you’re expected to demonstrate upon completion of the unit. In this way they can be used to guide your study.

Presentation

1. The assignment has to be presented in WORD. The Word document should be self- contained which means that all calculations, formulas, tables (even ones included in the Excel file) should be in the Word Document. We will only examine the Excel document to check your answer to see if you’ve done it Photograph of hand- written text will be marked as zero. All equations and mathematical workings presented in WORD should be typed with the Equation and Symbol function. Text format equation, such as x=2*(1-y)/(1+r), is NOT acceptable.

1. Students must correctly use the Harvard style of referencing. For details, students may consult with the Liaison
2. Students are encouraged to use tables and charts to enhance their

Submission

1. Only electronic submission via the CloudDeakin Assignment Dropbox will be Hardcopy or email directly to the Unit Chair will NOT be marked. Please assign ONE group member to submit. Submission from multiple members may well lead to unintended consequences, such as a high percentage similarity in the Turnitin report.
2. CloudDeakin Assignment Dropbox has no limit on how many times students submit, but ONLY the most recently received submission before the due date will be marked.

1. Each group should submit ONE WORD document and ONE Excel document.The WORD file should include:

i.              Cover Page (including group number, student names and student IDs)

1. Table of contents: indicate each question, their sub-sections (such as aand b) and relevant page numbers;

• Body/content of the assignment: all questions should be answered inorder;

1. Reference list: Harvard referencing style;

v.              Appendix (Optional)

1. Students will receive an email to their Deakin email address confirming that the submission is completed. Please keep this email receipt. Students should confirm the visibility of their assignment in the ‘Submissions’ view of the Assignment Dropbox folder after uploading. Students/Groups must keepa backup electronic copy of their submission, until the marked assignment has been released online. In the unlikely event that one of their assignmentsis misplaced, they will need to submit the backup
2. ‘Turnitin’ has been activated for the purposes of detecting collusion and/or plagiarism. Generally, Turnitin originality report should be available within 5 hours of the submission. Submissions with high percentage similarity may well be escalated to the Faculty Academic Misconduct Committee. In such case, the final grade of these students will be ‘pending’.