Week 2

1.    IN the week following Russia’s invasion of Ukraine, the Ruble moved from USD/RUB 30.0248 to USD/RUB 109.6327.  How much did the currency move

a.    From a Russian’s perspective in Foreign currency terms

b.    From a Russian’s perspective in home currency terms

c.    From a US investor’s perspective in Foreign currency terms

d.    From a US investor’s perspective in home currency terms

2.    Ukraine has a comparative advantage on the world wheat market.  Explain what that statement means

3.   Australia also has a comparative advantage in the global rice market.  Yet even though it has this advantage it is unable to export rice to Japan.  Explain why that may be the case

4.   Tesla is building industrial battery banks in Australia.

a.    Which of the five reasons that companies go global explain this move by Tesla?

b.   Which of the six challenges that companies face when they go global do Tesla face?

5.   Atlassian has opened an office in London, which it expects to be its launchpad into Europe. Explain the problem that Atlassian faces with its strategy.

 

 

Week 3

1.    However long the war in Europe lasts, one thing is certain, Ukraine will need to be rebuilt.

a.    Explain the gubernational agency that was developed to rebuild post-war Europe and which most likely will be engaged to rebuild post-war Ukraine.

b.   When this agency was developed, what other gubernational agency also was developed?

c.    Which global agreement were these two agencies a part?

2.    Before floating in 1983, the Australian dollar was:

a.    pegged against the British Pound

b.    Pegged against the US dollar

c.    Pegged against a basket of currencies

Explain these currency regimes

3.    Explain the impossible trinity.  Also, explain which of the three parts of the impossible trinity the Australian dollar enjoys and why it cannot achieve the third part of the trinity.

4.   The Euro is a global reserve currency.  Explain what that means.

 

Week 4

1.    Ukraine is a major exporter of wheat and minerals.  Explain what that means for the Ukrainian current account and balance of payments

2.    On the weekend of 26 and 27 February 2022, the financial gateway between Russian banks and the rest of the world, the SWIFT network, was shut down.  Explain the impact this event will       have on Russia’s balance of payments

3.    On 24 February 2022, Russian soldiers marched into Ukraine.  When Russia pays these soldiers, which account, and sub-account, in the Russian balance of payments will be impacted and in     which direction.

4.    Ukraine has a managed float currency regime.  Over the next two months, Ukraine is expected  to experience wild swings in its balance of payments, with a significant deficit in the first month and a significant surplus in the second month.  Explain how the central bank will manage the     currency over this period

5.    Following the outbreak of war in Europe, the GBP fell against the Euro.  IF this fall were to be sustained, explain how this fall will impact the UK trade

 

 

Week 5

1.   With Russia being cut out from SWIFT on 28 February 2022, what risk does that create for the FX settlement market?

2.    Explain why that risk is unlikely to eventuate

3.    Explain how traders wishing to obtain advantage from the volatility in the Rouble are able to capitalise on this opportunity even though the SWIFT network is not operational in Russia

4.    If most global currencies are quoted in pairs against the USD, explain if these quotes are American or European terms

5.    Starting with 50 lots in Euro, explain how much profit could be gained from the following currency pairs

a.    EUR/USD: 1.1116

b.    USD/PLN: 4.2708

c.    EUR/PLN: 4.7487

Week 6

1.    Honda has manufacturing plants in Germany and Japan.  If a Honda sells for JPY 5,115,600 in      Japan and the EUR/JPY is 127.8900, explain the concept whereby the same Honda would sell for EUR 40,000 in Germany

2.    If the AUD were to suffer a 10% decline against the JPY to AUD/JPY: 75.2601 from AUD/JPY: 83.6230:

a.    Why might Honda Australia decide to retain the price of the Honda at AUD 61,175?

b.   What is this concept called?

c.    At what price should Honda Australia sell that car to maintain profit levels?

3.    On February 28, 2022, the Russian central bank increased 1 year interest rates to 20%.  If the Us

1 year rate is 0.20% and the USD/RUB is 108.6247, determine the 1 year forward USD/RUB. Both countries use 30/360 day count convention.

4.    Determine the amount of arbitrage profit available from the following market conditions (show all workings) starting with 10 lots borrowed in the appropriate currency:

a.    Spot AUD/RUB: 79.7794

b.    6-month forward is 87.7782

c.    AUD uses Actual/365 day count

d.    RUB uses 30/360 day count

e.    Days in this 6-month period is 182

f.    AUD 1 year interest rate is 0.65%

g.    RUB 1 year interest rate is 19.85%

5.   What is the underlying assumption for the carry trade to be profitable?

 

 

Week 8

1.   The global currency markets are the largest most liquid markets on the planet, and therefore       arguably the most efficient.  Explain whether short-term or long-term forecasting of currencies is reliable and provide evidence.

2.    In early March 2022 the Russian Central Bank intervened in the market to support the Ruble.   Explain the capital controls used by the Russian Central Bank (references required) and explain the theory behind why the central bank intervened

3.   What are the implications for the Russian economy from these interventions?

4.    Explain the three schools of thought to determine exchange rates?  Which one is the more accurate measure?

5.    From 2007, the US Government has dramatically increased the supply of money compared with all other countries.  In theory, what should have happened to the US exchange rate?

 

 

Week 9

1.    Determine the cost of capital for the following US company:

a.    Risk free rate is 5.25%

b.    Expected return of the equity market is 11.22%

c.    Beta of the stock is 1.42

d.    Company tax is 29%

e.   The company has outstanding debt of $7.0875bn on which it pays an average interest rate of 10.95%pa

f.    The total value of the enterprise is $9.75bn

2.    Determine the cost of capital for the above company from the perspective of an investor in Europe where:

a.    The return of global stocks is expected to be 11.07% and their standard deviation is expected to be 17.63%pa

b.   The stock has a covariance with global stocks of 0.029487624

c.    The European corporate tax rate is 27.5%

3.    If the company were located in China where there are capital controls, rather than the US, explain the options available for this company to raise capital.

4.   As this company expands globally, explain:

a.    What, logically, should happen to its cost of capital?

b.   What actually happens to its cost of capital?  Why?

5.    Explain the argument for companies seeking to raise capital from a global market and the expected impact on the company’s stock price

 

 

 

 

Week 10

1.    Following the commencement of the war in Europe, several large Russian companies now are seeking to establish offshore subsidiaries to maintain access to capital.  Explain the funding     options available for these companies

2.    For the companies described above:

a.    explain the pathways to raising global capital for these companies.

b.    Do you expect these companies will be successful in their quest?

c.    Explain why

3.   With interest rates so low it is expected that many companies will be accessing the debt markets to raise capital.

a.    Explain what will happen to the cost of capital of the company as it increases its debt capital

b.    Even though debt is a cheap form of capital, explain why companies do not fund themselves entirely by debt

4.    BHP recently ceased its share listing on the LSE.

a.    When it was listed on the LSE, what type of a listing was it?  Explain.

5.    BHP historically also was listed on the NYSE via depository receipts that it supported.

a.    Explain the different types of depositary receipts available to BHP

b.    Explain the process that such depositary receipts are created

 

 

Week 11

1.    Explain

a.    the prime risk that exporting and importing companies face

b.   the source of this risk

c.    The name of this risk

2.    Explain how this risk is managed

3.    Explain the three documents that are used to manage this risk

4.    Explain who issues and who receives each of the three documents

5.    Explain the support services the Australian government provides to companies wishing to access the export markets

 

 

Week 12

 

 

1.    Explain the three elements that a company should satisfy before it opens an international subsidiary

2.    Explain why Australian companies tend to expand offshore into the US, UK and Europe before opening subsidiaries in Asia

3.    Explain the political risks that Russian companies presently are experiencing

4.    Should Russia be successful in its war in the Ukraine, explain the risks that companies in the Ukraine face

5.   The Australian mining company Sundance recently experienced the greatest risk that companies expanding offshore can face.  Explain this risk with reference to Sundance.