FNCE3001: Introduction to Financial Instruments and Markets – Research Project
Introduction to Financial Instruments and Markets
This project is worth 70 marks.
• Marks are allocated for presentation of assignment, analysis and written report.
• Any assumptions that you rely upon must be clearly stated in the written report. Do not just state something without developing an argument or discussion.
Total Marks: 70
Formatting requirements:
• Maximum of 10 sides of A4 (excluding tables, diagrams, references and appendices).
• Word limit 4000 Max (excluding references and appendices).
• Font size ≥ 11; Font face is Times New Roman.
• Line-spacing 1.5 and minimum margin 2.54 cm in all 4 sides.
• Submission is via Turnitin
• Ensure you attach the assessment cover sheet as a frontpage to your assignment and the signed group cover form.
Learning outcomes associated with assignment:
This is a group/individual research assignment (a group of max 2 members)
You are expected to undertake research, analysis, take responsibility for your submission. Questions are linked – they are broken down into marks to assist you in structuring your answers and research.
1. Compare the types of equity securities that companies can use to raise equity capital and understand how share prices are determined.
2. Interpret international financial economic theories in relation to financial instruments and markets, including the effect on calculation of financial instrument prices
3. Ethics and behavioural finance
Group Project Cover Sheet - Integrated Financial Instruments & Markets
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Comments: |
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Contribution Key: (1)Did less than fair share,(2) Did fair share,(3) Did more than fair share. Recall that there is a 50% penalty if you did not contribute your fair share to completion of the project. Please use the comments section to note any comments you have on the way in which your team worked on the project, the structure of the project, and possible improvements for the project in future sessions.
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Qn. |
Max. Mark |
Assessed Mark |
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Part 1 |
15 |
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11 |
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Part 2 |
15 |
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10 |
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5 |
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Part 3 |
9 |
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Formatting |
5 |
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Marker’s Comments: |
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Group/Individual Project Total 70 marks
Formatting [Total: 5 marks]
Five marks are allocated to the presentation of your assignment. For example, to receive full marks for your assignment you must adhere to the formatting requirements, provide well-presented and labelled charts (if appropriate) and include references.
Question 1 [Total: 26 Marks]
Envestnet Inc (NYSE:ENV) is a stock listed on NYSE.
You will consider the time-period and daily share price of the company for the period 1st of April 2022 until 10th of August 2023.
Provide a bar or candlestick chart (or multiple charts) of the daily share price for the time period above.Identify at least three days, where news stories, events or issues related to the company have majorly impacted the share price.Evaluate and discuss the magnitude and direction of the price changes (opening to close) of the instances you have identified.Your answer should consider why the news/event/story impacted the share price in the manner that it did, as well as other possible considerations besides the identified news articles that you believe would have impacted the share price. (15 marks)
Next, use the chart created above and a technical analysis tool from learning module 4 to predict future stock price movements. What does your analysis indicate if you were an existing investor? (would you buy, sell or hold?). What does the usage of technical analysis mean for the theory of market efficiency? (11 marks)
Question 2 - [Total: 30 Marks]
You have been considering investing in Envestnet Inc (NYSE:ENV). You have decided to do a more thorough analysis of it.
i) Provide an industry and company analysis for ENV (see supplementary resources on Blackboard). You should consider the factors which influence ENV's share price (e.g. key competitors, peers, industry influences, company business, key financial ratios). (15 marks)
ii) Identify and discuss at least one benchmark that you have chosen to compare ENV against. What considerations did you make in your choice of benchmark? Chart your choice of benchmark against ENV's share price over the same period in Question 1 and compare the two graphically. What, in your opinion has been the main driver for the share price movement? (10 marks)
iii) Valuation multiples are often used to compare companies quickly. Identify an appropriate valuation multiple/ratio and evaluate if ENV is over, under or fairly valued. Explain the reasoning behind your choice of multiple that you utilised for your analysis. Are there any limitations of utilising multiples that you might need to consider? (5 marks)
Question 3 - Ethics [Total 9 Marks]
Please treat each part as an independent question.
a) Assume we are now in the first week of August 2023. You have made a decision to buy shares of ENV in late August. However, your friend who is a financial advisor for ENV tells you that its earnings for the second quarter 2023 will be higher than the analyst estimates. Your friend suggests you to buy its shares now (i.e. the first week of August 2023) before this information is announced to the public (and price changes). Please state and explain which CFA Institute Code and Standards your friend has breached. Please explain two standards breached. (4 marks)
b) A friend on social media would like to invest in JKHY (i.e. purchase its shares). She posts false rumours about JKHY currently losing market share to its competitors and having a downtrend in its relative performance to competitors in order to influence the share price. What is the current price of Jack Henry & Associates Inc. (choose any date from 1st of August 2023) ?
How would her attempt to influence the share price be viewed if you considered this in light of the CFA Code of Ethics and Standards of Professional Conduct (Please explain two standards she has breached). (5 marks)