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FINA302-24B Group Assignment
Due: Saturday, 8 June 2024, 11:59 PM
Notes:
1. We can work individually but the maximum group size is 3. No marks will be given if 1) you exceed the group size limit of3, or 2) you do not provide information about group member contribution.
2. Please use the cover page and submit one and only one file via Moodle by each group with all group member information. Put the video presentation link (YouTube, etc.) in the submitted file. The page limit is 10.
3. This assignment accounts for 30% of the total assessment. The full mark for this assignment is 100. Your submissions will be checked by Turnitin.
4. You are expected to show all workings and provide explanations when necessary to achieve full marks.
Bond Market
Go to http://www.tipsinc.com/ficalc/calc.tips. Choose the link for the general-purpose bond calculator. The calculator provides yield to maturity, modified duration, and bond convexity as the bond’s price changes. Experiment by trying different inputs. What happens to duration as coupon increases? As maturity increases? As price increases (holding coupon fixed)? (30 marks)
Tips: data inputs (a table is preferred); plot the relationship; explain the implications.
Macroeconomics
Is the U.S. economy in a recession or not? Check the “official” opinion at the National Bureau of Economic Research (NBER) about the Official Business Cycle Dates.
https://www.nber.org/research/business-cycle-dating
How does theNBER select the beginning or end of a recession (follow the available link for a discussion of this topic)? What period in U.S. economic history was the longest expansion? Contraction? Look at the Announcement Dates section toward the bottom of the page. How much of a time lag is there between when a peak or a trough occurs and when it is announced? What implication does this have for investors? (30 marks)
Tips: use the methodology in one of the announcements to discuss the status of US economy. Explore the announcements methodology; illustrate the data (plot, table, etc.); lag indicator.
Diversification (Knowledge of FINAN202 is required)
1) How is portfolio diversification achieved? What are the constraints of international diversification? What is the limitation of diversification during a market-wide crisis? (15 marks)
Tips: Use the content covered by FINAN202 and 302.
2) Illustrate the limitation of diversification during GFC or Covid- 19. Start with a stock market index and one of its component stocks. Collect the monthly/daily index and stock price data for five years around the event year. Calculate annual standard deviations for the index and stock returns. Show the trend in a chart and discuss (25 marks)
Tips: Show the data tables and use plots for illustration.