AFIN3010 Assignment : Session 2 -2020 Topic: An Overview of Risks in Banking and Investments Session-2, 2020 (Due on Tuesday 15 September 2020 at 11pm) The report is worth 25% of the total course mark and worth 50 marks in total. The assignment to be completed individually. MARKING: Your report will be marked according to the comprehensiveness of the summary of your findings as well as the depth of your discussions. Please make sure your report is well written and free of typos and grammatical errors. Proofread your report before submission and label your answers clearly. Marks (up to 5 marks) could be deducted for poor presentation, exceeding the number of pages, typos and/or grammatical errors. You must submit the report and excel file before 11pm on Tuesday 15 September 2020. Case Study: Australian Resources Companies BHP Billiton and Rio Tinto BHP Group Limited operates as an international resources company. The Company explores and mines minerals such as coal, iron ore, gold, titanium, ferroalloys, nickel, and copper properties, as well as offers petroleum exploration, production, and refining services. BHP Group serves customers worldwide. Beyond iron ore, its activities include exploration and development of untapped resources, extraction and processing of commodities, as well as rehabilitation and closure of operational sites, primarily in Australia and the Americas. BHP has significant annual productions of iron ore (more than 230 Mt), petroleum (some 210 MMBoe), coal (70 Mt), and copper (63 Kt). Rio Tinto Limited is an international mining company. The Company has interests in mining for aluminum, borax, coal, copper, gold, iron ore, lead, silver, tin, uranium, zinc, titanium dioxide feedstock, diamonds, talc and zircon. Rio Tinto Limited, one of the world’s largest mining operations (along with BHP Billiton and Vale), is the Australian half of dual-listed sister companies, with Rio Tinto plc taking up residence in London. Although each company trades separately, the two Rio Tintos operate as one business. Rio Tinto explores for a variety of commodities: bauxite, coal, copper, diamonds, gold, iron ore, minerals (borates and titanium
dioxide), nickel, and potash. Iron ore makes up about 44% of the group’s sales. It also produces aluminum through its Rio Tinto Alcan unit. Most of its businesses are in Australia and North America, but it is expanding its operations in China and Mongolia. Please refer to data available on Yahoo Finance, the company annual report and website to learn more about BHP Billiton and Rio Tinto. Purpose of this Assignment As both BHP Billiton and Rio Tinto are local resources companies - which are publicly listed companies and also have debt issuances in the investment market via bonds – you have been assigned to evaluate any risks associated with investing in these companies. Question One (Total: 15 Marks) Compare and contrast the credit ratings assigned by either Fitch, Moody’s or S&P Ratings (any single agency can be used for comparison) to these companies. Based on your research, please describe the key reasons for difference or similarities in ratings assigned to each. Please provide some supporting information from their financial statements FY2020. (2 pages maximum) Question Two (Total: 10 Marks) Below are examples of bonds issued by BHP Billiton and Rio Tinto. Calculate the credit risk premium based on the current yields for each bond. (5 Marks) BHP Billiton
Assumptions Bid Price: 127 Offer Price: 129 Yield to Maturity (Offer): 2.39% (Note: Use a comparable 20 year risk free proxy ie US treasury yield for calculation) Source: Bloomberg
Assumptions Bid Price: 127.5 Offer Price: 130 Yield to Maturity (Offer): 2.36% (Note: Use a comparable 20 year risk free proxy ie US treasury yield for calculation) Source: Bloomberg Calculate the bid/offer spread of each bond. Which bond has higher liquidity risk? (5 Marks)
Question Three: (10 Marks) Calculate the beta for BHP Billiton and Rio Tinto Shares (listed on ASX) in excel. • Using daily data returns from 30 June 2018 to 30 June 2020 • use the ASX200 as the market index Provide a summary of calculations as to how you arrived to the final Beta figure. Which stock has a higher beta and what does it imply for each of the stock? Question Four: (15 Marks) Identify any additional risks a global investor could face while investing in BHP Billiton and Rio Tinto shares and bonds over the next six to twelve months. (Note: Elaborate two risks each for BHP shares and two risks for BHP bonds and the same for RIO shares and bonds).
Please provide a quote to write a paper including the below requirements.
Capital Investments in Emerging Markets
Use the Internet and/or Strayer Library to research a publicly traded manufacturing company of your choice. Review the current plans that your selected company has identified for capital investments in emerging markets. Note: You can find useful information on a company’s capital investment plans from their website and/or press releases.
Write a 5–6-page paper in which you:
- Suggest a methodology to supplement the traditional methods for evaluating the capital investments of your selected company in the emerging markets to reduce risk. Provide a rationale for your suggested methodology.
- Assess one way in which inflation could potentially impact planned capital investments in emerging markets and examine one (1) approach to perform an accurate evaluation of the investments. Suggest how this knowledge may impact management’s decisions.
- Contrast the modifications you would make in evaluating the projects to increase internal capacity in the largest market in which the company currently operates with the modifications you would make in evaluating expansion projects into secondary markets. Suggest one way that this information will impact the decisions made related to expansion.
- Examine two benefits of using sensitivity analysis in evaluating the projects for your selected company. Suggest how this approach can provide a competitive advantage for the company.
- Use at least three quality academic resources in this assignment. Use the Strayer Library to conduct your research. Note:Wikipedia and other websites do not qualify as academic resources.
Your assignment must follow these formatting requirements:
- Typed, double spaced, using Times New Roman font (size 12), with one-inch margins on all sides.
- Include a cover page containing the title of the assignment, the student’s name, the professor’s name, the course title, and the date. The cover page and the reference page are not included in the required assignment page length.
This course requires the use of Strayer Writing Standards. For assistance and information, please refer to the Strayer Writing Standards link in the left-hand menu of your course. Check with your professor for any additional instructions.
The specific course learning outcome associated with this assignment is:
- Create a recommendation for evaluating a company’s capital investments in emerging markets that includes the potential impact of inflation, modifications to evaluating projects, and benefits of using sensitivity analysis.
for each situation, identify the main financial planning issues that need to be addressed.2. what additional information would you like to have before recommending actions in each situation3. based on the information provided and your assessment of the situation, what actions would you recommend for the Blakes, Patrick and Nina?
Instructions for completing and submitting this assignment
Completing the assignment
This assignment contains:
• Six (6) sections in which questions are asked based on the information provided about your clients, David and Trish Thompson, and their family. These must be completed in detail according to the question guidelines.
• Section 3 is the Statement of Advice (SOA) template which must be completed in the format provided with no alterations. Guidelines are provided relating to the information that is required throughout the template.
• Appendix 1 of the SOA contains a table that must be filled out based on each client’s current situation.
• Appendix 2 of the SOA contains a table that must be filled out with information that applies to each client’s situation after all recommendations are implemented.
• Appendix 3 of the SOA contains two tables.
– Table 1 is a projection of David’s and Trish’s superannuation account balances based on their current position as well a projection of each position when all recommendations are implemented.
– Table 2 is a projection of the pension account balance once a pension is commenced on David’s sixtieth birthday.
You are required to complete ALL sections of the assignment.
Word count
The word count shown with each question is indicative only. You will not be penalised for exceeding the suggested word count. Please do not include additional information which is outside the scope of the question.
Additional research
When completing this assignment, assumptions are permitted although they must not be in conflict with the information provided in the case study.
You may also be required to source additional information from other organisations in the finance industry to find the right products or services to meet your client’s requirements, or to calculate any service fees that may be applicable.
Saving your work
Download this document to your desktop, type your answers in the spaces provided and save your work regularly.
• Use the template provided, as other formats will not be accepted for these assignments.
• Name your file as follows: Studentnumber_SubjectCode_Submissionnumber
(e.g. 12345678_DFP1B_Submission1).
• Include your student ID on the first page of the assignment.
Before you submit your work, please do a spell check and proofread your work to ensure that everything is clear and unambiguous.
Submitting the assignment
You must submit your completed assignment in a compatible Microsoft Word document.
You need to save and submit this entire document.
Do not remove any sections of the document.
Do not save your completed assignment as a PDF.
The assignment must be completed before submitting it to Kaplan Professional Education. Incomplete assignments will be returned to you unmarked.
The maximum file size is 5MB. Once you submit your assignment for marking you will be unable to make any further changes to it.
You are able to submit your assignment earlier than the deadline if you are confident you have completed all parts and have prepared a quality submission.
The assignment marking process
You have 12 weeks from the date of your enrolment in this subject to submit your completed assignment.
Should your assignment be deemed ‘not yet competent’ you will be give an additional four (4) weeks to resubmit your assignment.
Your assessor will mark your assignment and return it to you in the Accountants SMSF Package (ASPv3) subject room in KapLearn under the ‘Assessment’ tab.
Make a reasonable attempt
You must demonstrate that you have made a reasonable attempt to answer all of the questions in your assignment. Failure to do so will mean that your assignment will not be accepted for marking; therefore you will not receive the benefit of feedback on your submission.
If you do not meet these requirements, you will be notified. You will then have until your submission deadline to submit your completed assignment.
How your assignment is graded
Assignment tasks are used to determine your ‘competence’ in demonstrating the required knowledge and/or skills for each subject. As a result, you will be graded as either competent or not yet competent.
Your assessor will follow the below process when marking your assignment:
• Assess your responses to each question, and sub-parts if applicable, and then determine whether you have demonstrated competence in each question.
• Determine if, on a holistic basis, your responses to the questions have demonstrated overall competence.
‘Not yet competent’ and ‘Not yet demonstrated’ resubmissions
Should your assignment be marked as ‘not yet competent’ you will be given an additional opportunity to amend your responses so that you can demonstrate your competency to the required level.
For any sections of the ‘result summary’ marked as ‘not yet demonstrated’, you must address the assessor’s feedback in your amended responses. You only need amend those sections the assessor has determined as ‘not yet demonstrated’.
If a resubmission is required, make changes to your original submission. Use a different text colour for your resubmission (ideally not red).Your assessor will be in a better position to gauge the quality and nature of your changes. Ensure you leave your first assessor’s comments in your assignment, so your second assessor can see the instructions that were originally provided for you. Do not change any comments made by a Kaplan assessor.