AFW1300 UNIT GUIDE

Money and capital markets

SYNOPSIS: On completion of this unit students should demonstrate an understanding of a financial system, its operation and component parts; yield curve analysis, the term structure of interest rates, and exchange rate interaction; sources and types of business finance, short, medium and long term, domestic and overseas, and associate pricing formulae; the structure and operation of Australian financial institutions and markets; the major types of risk and the derivative products available to manage financial risk; the structure, functions and role of prudential supervision in the financial markets.

Mode of delivery: On-campus

Workload: This is a six credit point unit with three class contact hours a week through a twelve-week semester. For each six credit point unit the University expects a student to spend twelve hours a week in class contact and self-directed study:http://www.monash.edu.au/pubs/handbooks/policy/policy-4b.html.

Prohibitions: AFC2000, AFF1300, AFG1300

Chief examiner: Dr Nicole Lai Mun Sim

Sunway Campus Coordinator: Dr Nicole Lai Mun Sim

Phone: +603 5514 4930

Email: nicole.lai@buseco.monash.edu.my

Berwick Campus Coordinator: Dr Berty Vidanapathirana

Phone: TBA

Email: berty.vidanapathirana@monash.edu

SEMESTER S1 2011HANDBOOK ENTRY: http://www.monash.edu.au/pubs/2011handbooks/units/AFW1300.html

www.monash.edu

ACADEMIC OVERVIEW

Learning objectivesThe learning goals associated with this unit are to:

1. describe the structure and operation of financial institutions and markets in Australia

2. evaluate short and medium to longer term financial instruments

3. explain government monetary policy and the term structure of interest rates

4. describe the derivative products available to manage financial risk

5. apply critical thinking, problem solving and presentation skills to individual and/or group activities dealing with money and capital markets and demonstrate in an individual summative assessment task the acquisition of a comprehensive understanding of the topics covered by AFW1300.

Graduate attributesMonash prepares its graduates to be:

1. responsible and effective global citizens who:

engage in an internationalised world

exhibit cross-cultural competence

demonstrate ethical values

2. critical and creative scholars who:

produce innovative solutions to problems

apply research skills to a range of challenges

communicate perceptively and effectively

Assessment s ummary

ASSESSMENT TASK DUE DATE VALUE

Assessment Task 1: Major Assignment Wednesday 4 May (Week 9) 20%

Assessment Task 2: 4 Online Quizzes Quiz 1 Week 3 (14 March)

Quiz 2 Week 6 (4 April)

Quiz 3 Week 9 (2 May)

Quiz 4 Week 12 (23 May)

10%

Final Examination Official Examination Period 70%

TOTAL 100%

Hurdle requirementThere is a hurdle requirement in this unit. The learning outcomes in this unit require students to demonstrate in the individual summative assessment task a comprehensive understanding of the topics covered in the unit. This is demonstrated by the requirement that the student must attain a mark of at least 50% in the final summative assessment task.

Copyright © Monash University 2011 2

A student's final mark is normally the sum of the marks obtained in all of the individual assessment items in the unit. Where a student fails the unit solely because of failure to satisfy the hurdle requirement, a mark of 48 will be returned for the unit.

Second markingWhere an assessment task is given a fail grade by an examiner, that piece of work will be marked again by a second examiner who will independently evaluate the work, and consult with the first marker. No student will be awarded a fail grade for an assessment task or unit without a second examiner confirming the result.

Note: Exceptions to this are individual pieces of assessment contributing 10% or less of the final mark, unless the total of such pieces exceeds 30% of the final mark.

Return of final marks for the unitFaculty policy states that ‘the final mark that a student receives for a unit will be determined by the Board of Examiners on the recommendation of the Chief Examiner taking into account all aspects of assessment’.

The final mark for this unit will be released by the Board of Examiners on the date nominated in the Faculty Calendar. Student results will be accessible through the my.monash portal.

Exam viewingFeedback on student performance in examinations and other end-of-semester assessment is required, in accordance with the University procedures on Unit Assessment. For more information, please see the following URL: http://www.buseco.monash.edu.au/aaf/student/exam-view/index.html.

Learning and teaching approachThis unit will be taught as a two-hour lecture and a one-hour tutorial each week for 12 weeks. The lecture sessions will cover significant points of the topics (see Unit Schedule), and may be used to discuss a number of the set problems. It is not intended that the lecturer will cover every aspect of each topic, but rather provide a framework of the important theoretical concepts and practical issues. Given this framework students are expected to attend all lecture and tutorial sessions and participate actively. In order to participate and to gain maximum benefit from the sessions, all the questions, set for each week, are to be attempted before the tutorial for that week. At times in the lecture and tutorial sessions the lecturer or tutor will invite students to raise and discuss relevant issues and areas of concern. Students should take this opportunity, particularly in tutorials, to clarify areas of difficulty and to contribute actively to the discussion of the model answers to the set of weekly questions.

Students are expected to spend additional private study time and access the recommend readings, which are listed in this guide and on Blackboard. In addition to the recommended readings and sets of weekly questions, a number of past examinations and tests, together with model answers, are provided on Blackboard. These resources enable students to develop a mastery of the topics covered by the unit.

To ensure a high probability of completing successfully this unit, students need to approach it in a systematic way. At a minimum this should involve:

reading the prescribed material prior to each weekly session;

preparing solutions to each set of questions prior to the session;

attending sessions and participating in discussions of model answers;

reviewing material from other references from time to time; and

attempting relevant past examination and test questions.

Copyright © Monash University 2011 3

FeedbackOur feedback to youStudents will receive feedback on work in the following ways:

Feedback on written work will be provided to enable students to improve their knowledge

Feedback on class presentations will be given after each presentation to enable student to improve their presentation skills.

Students will have the opportunities to discuss questions in lectures and tutorials.

Students will be provided with solutions to tutorial questions.

Students will be provided with lecture via Blackboard.

Staff will be available at specific consultation times: these times are available via Blackboard. Students are strongly recommended to use this opportunity to get substantial feedback.

Students can also contact teaching staff, on unit related issues, via phone or email

Your feedback to usMonash is committed to excellence in education and regularly seeks feedback from students, employers and staff. One of the key formal ways students have to provide feedback is through SETU, Student Evaluation of Teacher and Unit. The University’s student evaluation policy requires that every unit is evaluated each year. Students are strongly encouraged to complete the surveys. The feedback is anonymous and provides the faculty with evidence of aspects that students are satisfied and areas for improvement.

For more information on Monash’s educational strategy, and on student evaluations, see:http://www.monash.edu.au/about/monash-directions/directions.html andhttp://www.policy.monash.edu/policy-bank/academic/education/quality/student-evaluation-policy.html.

Previous student evaluations of this unitIf you wish to view how previous students rated this unit, please go to https://emuapps.monash.edu.au/unitevaluations/index.jsp.

Required resourcesPrescribed text available from the University Bookshop

Edirisuriya, P. (2010) Money and capital markets. McGraw-Hill.

Publication for Department of Accounting and Finance, Monash University.

Blackboard (MUSO)Material used in class together with other information of importance to students will be published online. In order to access information about this unit in Blackboard you must be enrolled in the unit and have a valid Authcate Username and Password. Blackboard is accessed through the my.monash portal at URL: https://my.monash.edu.au/muso/blackboard/login/.

Q ManualThe Q Manual is a student guide for producing quality written work on time. Printed copies are available at the bookshop or online at URL: http://www.buseco.monash.edu.au/publications/qmanual/qmanual.pdf.

CalculatorsElectronic devices (including calculators) are not permitted in tests and examinations in this unit unless identified with an “approved for use” label. These labels are available from:

Copyright © Monash University 2011 4

Berwick Campus: Jan Ottrey (Building 901, Room 130B) Sunway Campus: Course Management Staff (Building 6, Level 4, Room 9)

Recommended resourcesRecommended texts and readings

Hunt, B., & Terry, C. (2008). Financial institutions and markets (5th ed.).Thomson.

Kidwell, D. S, Brimble, M., Beal D., & Willis, D. (2007). Financial markets, institutions and money. John Wiley & Sons Australia, Ltd.

Lewis, M. K., & Wallace, R. H. (1997). The Australian financial system. South Melbourne: Longman.

Mishkin F. S., & Eakins S. G. (2006). Financial markets and institutions (6th ed.). Boston: Addison Wesley.

Reserve Bank of Australia (1990 – ), Bulletins and Annual Reports.

Valentine, T., Ford G., Edwards V., Sundmacher, M., & Copp, R. (2006). Financial markets and institutions in Australia (2nd ed.). Frenchs Forest: Pearson Education.

The RBA Web site at: http://www.rba.gov.au provides electronic versions of some RBA publications.

Copyright © Monash University 2011 5

UNIT SCHEDULE

NB. Model answers to each set of weekly self-study questions, exercises and problems will be explained and discussed at lectures and tutorials in the following teaching week, except for the set specified for week 12. The model answers to week 12 self-study questions, exercises and problems will be posted on Blackboard at 5:00pm on the last day the semester.

WEEK DATE TOPIC READINGS QUESTIONS

1 28 FEB The Financial System: Overview

Financial Institutions and Prudential Regulation – Part 1

Ch 1

Ch 2

Tutorial Questions to Study: Week 1: Ch 1- Q4 and Ch 2 – Q2, Q6, Q9.

Visit Web sites: www.apca.com.au; www.apra.gov.au and www.bis.org

2 7 MAR Financial Institutions and Prudential Regulation – Part 2

Ch 3 Tutorial Questions to Study: Week 2: Ch 3 – Q4, Q6, Q8 & Q12.

Visit Web sites of ANZ Bank, Commonwealth Bank, National Australia Banks, Westpac Bank and www.standardandpoors.com.au

2. Study the essay question in the lecture 3 notes

3 14 MAR Interest rate Determination: Term and Risk Structure of Interest Rate

Ch 13 Tutorial Questions to Study: Week 3: Ch 13 – Q1, Q5, Q9, & Q11.

Visit Web site www.bis.org

4 21 MAR Government Debt, Monetary Policy and Payment System

Ch 12 Tutorial Questions to Study: Week 4: Ch 12 – Q5, Q6, Q9, & Q11.

Visit Web site: www.afr.com.au/

5 28 MAR Mathematics of Finance Ch 8 Tutorial Questions to Study: Week 5: Ch 8 – Q2(a)(f), Q3(a)(c), Q4(a), Q6(a), & Q7 (a)(b)

Visit Web site www.afma.com.au

6 4 APR The Share market Ch 4

Ch 5 pp 218–233

Ch 6 pp 244–261 &

pp 266–271.

Tutorial Questions to Study: Week 6: Ch 4 – Q6 ; Ch 5 – Q7, Q12; Ch 6 – Q1

Visit Web site www.treasury.gov.au

Additional reading: Engelen, P., & van Essen, M. (2010). Underpricing of IPOs: Firm-, issue- and country-specific characteristics. Journal of Banking & Finance, 34(8),1958–1969.

7 11 APR The Money Market Ch 9 Tutorial Questions to Study: Week 7: Ch 9 – Q5, Q6, Q9 & Q10.

Visit Web site www.sfe.com.au/

Copyright © Monash University 2011 6

8 18 APR The Bond Market Ch 10 Tutorial Questions to Study: Week 8: Ch 10 –Q3, Q4, Q6, Q10 & Q13.

Visit Web site www.fitchratings.com.au

MID SEMESTER BREAK 22 APRIL – 29 APRIL

9 2 MAY International Debt Markets Ch 11 Tutorial Questions to Study: Week 9: Ch 11 –Q2, Q4, Q5, & Q11

Visit Web site: www.asx.com.au/

10 9 MAY Foreign Exchange Market Ch 15 Tutorial Questions to Study: Week 10: Ch 15 – Q3, Q4, Q9, & Q11.

Visit Web site: www.rba.gov.au/; www.rbnz.gov.nz/

11 16 MAY Derivative Markets and Risk Management part 1

Ch 18 Tutorial Questions to Study: Week 11: Ch 18 – Q1, Q2 Q4, Q7

12 23 MAY Derivative Markets and Risk Management part 2

REVISION

Ch18

REVISION

Tutorial Questions to Study: Week 11: Ch 18 – Q8, & Q9

Visit Web site: www.asx.com.au/; www.cbot.com/

Additional reading: Campbell, J. Y., Medeiros, K. S. & Viceira, L. M. (2010). Global currency hedging. The Journal of Finance, 65(1), 87–121.

SWOT VAC 30 MAY – 3 JUNE

OFFICIAL EXAMINATION PERIOD 6 JUNE – 24 JUNE

Copyright © Monash University 2011 7

ASSESSMENT REQUIREMENTS

Assessment Task 1: major assignmentWeighting: 20%

ASSIGNMENT ISSUE:

Choose ONE topic from either: share market, bond market or monetary policy. Select at least two regions (or subregions) such as Europe, Asia, Africa, (or Eastern / Western Europe, Southeast / East Asian), and compare the policy or market, discussing the similarities and differences between the regions.

The topic you chose could be a specific financial instrument/market or broader view of the market structure. One example is to compare and contrast the monetary policies in USA, Europe and Asia during the USA subprime mortgage financial crisis, and discuss which policies worked well.

Task details:The objective of this report is to apply your theoretical knowledge to explain and analyse a current financial market related issue. Through this process students will gain a broader understanding of global and domestic financial system related issues.

The assignment report is to be word-processed and presented in a business report format. It should include in the following order:

a letter (or a memo) of transmittal (addressed to the tutor stating that the assignment report is being submitted and also briefly describing in one or two sentences the significance of the issue/s addressed in the report);

executive summary; table of contents; Refer Q Manual that adopts a slightly modified APA style for the reference citation in text (or

footnotes). Body of report; reference list; and appendices.

Please note that there is no need to give purpose, scope, method, limitations and assumptions in your report.

Students should start their research for the report by reading the prescribed textbook for this subject: Edirisuriya (2010). Thereafter, students can obtain additional research material from many sources such as The Australian Financial Review, The Australian and The Age. Students can also search periodicals such as Business Review Weekly, The Economist, Shares, Personal Investor and any other business/finance journals or newspapers for additional articles via the Monash University library on-line databases. Some useful financial web sites are also indicated in this unit guide. Data could be obtained from the Monash University library databases. After a thorough literature search on the above lines with adequate research material in hand, students need to use the marking guide attached to this unit guide in writing their assignment report.

Appendices: Attach any important information such as current newspaper articles, journal articles or reports relating to the topic in the appendices, which should be numbered as I, II and III so on but will carry the usual page numbers. However, make sure to attach only very relevant information and do not attach all reference newspaper/journal articles.

The attached marking guide structure should be used as a guide to writing your report. Students must retain a copy of the assignment for their reference.

Copyright © Monash University 2011 8

Word limit: 2,000 (show word count on title page). Marks will be deducted for excessive length. The number of words used in the letter of transmittal, the executive summary, the table of contents, footnotes, appendices and reference list are excluded from the word limit of 2,000 words.

Due date: Wednesday 4 May by 5:00pm (Week 9)

Group/Individual: Students can choose to complete this assignment as a group OR individual assessment task. A maximum of two people per group is permitted. Students can ONLY form a group with other students in their tutorial class.

Submission details:Hardcopy assignments should be submitted to your tutor or as instructed by your tutor. Electronic submission is not permitted.

Return of marks:Marked assignments will be returned to students during tutorials in Week 12. Students who do not attend Week 12 tutorials may collect assignments from their tutor during consultation times from Week 12 onwards.

Faculty style guideWork submitted for these assessments must follow the Faculty Style as outlined in the Faculty Q Manual. Copies of this Manual can be obtained at the bookshop or on line at URL: http://www.buseco.monash.edu.au/publications/qmanual/qmanual.pdf.

Penalties for late lodgementA maximum penalty of two marks allocated to the assessment tasks will be deducted for each day they are late.

Applications for extension of timeApplications for an extension of time allocated to an assessment task must be made by completing the application form found at URL. http://www.buseco.monash.edu.au/student/exams/speccon.html. The form must be submitted to the Chief Examiner for approval.

Assignment coversheetWork submitted for assessment MUST be accompanied by a completed and signed assignment coversheet, available at URL: http://www.buseco.monash.edu.au/student/forms/assessment-coversheet.doc. In the case of group assignments, each member of the group must complete and sign a separate assignment coversheet.

Assessment Task 2: online quizzesWeighting: 10% (2.5% each)

Task details:Students are required to take four online quizzes accessed via Blackboard.

An online quiz must be completed by students during teaching Weeks 3, 6, 9, and 12, between the hours of 9:00am AEST (Monday) and 8:00pm AEST (Friday), of the respective weeks (please refer to dates for further details). Students can only sit each online test once. The quizzes will be randomly constructed from a database consisting of a large number of multiple choice questions. Failure to sit any of the quizzes during the relevant teaching weeks will result in the student receiving a grade of zero for that particular quiz. The quizzes have been developed to ensure all

Copyright © Monash University 2011 9

students are familiar with the lecture and tutorial material throughout the duration of the course. We trust that students will abide by a strict honour code and will not have anyone other than themselves undertake the quiz. Any breech of this code that is brought to the Unit Leaders attention and where sufficient evidence exists will result in disciplinary action.

Date:Quiz 1: Week 3 between 9:00am AEST (Monday, 14 March) and 8:00pm AEST (Friday, 18 March).

Quiz 2: Week 6 between 9:00am AEST (Monday, 4 April) and 8:00pm AEST (Friday, 8 April).

Quiz 3: Week 9 between 9:00am AEST (Monday, 2 May) and 8:00pm AEST (Friday, 6 May).

Quiz 4: Week 12 between 9:00am AEST (Monday, 23 May) and 8:00pm AEST (Friday, 27 May).

Materials examinable:Quiz 1: materials covered in lectures and prescribed reading in weeks 1 & 2.

Quiz 2: materials covered in lectures and prescribed reading in weeks 3, 4 & 5.

Quiz 3: materials covered in lectures and prescribed reading in weeks 6, 7 & 8.

Quiz 4: materials covered in lectures and prescribed reading in weeks 9, 10 & 11.

Return of marks:Marks will be made available to students immediately after the completion of each online quiz.

Special consideration Class Test ≤ 10%If an application for special consideration is received within two full days after a mid-semester test weighted at 10 per cent or less of the final mark; and the application is approved by the Chief Examiner, then the Chief Examiner will have the option of either setting an equivalent make-up test prior to the examination period or to have the weighting of the final examination increased by the weighting of the mid-semester test.

ExaminationWeighting: 70%

Duration: 3-hour examination

Task details:This will be a closed book examination and approved calculators will be permitted.

Date and location:This examination will be held during the official examination period. The examination timetable which provides full details of the examination schedule can be accessed through the my.monash portal.

Materials examinable:All lecture materials, tutorial materials and prescribed reading.

Copyright © Monash University 2011 10

ASSESSMENT CRITERIA GRADING DESCRIPTORS

High Distinction

(80%+)

Distinction

(70 – 79%)

Credit

(60 – 69%)

Pass

(50 – 59%)

Fail

(Less than 50%)

General description

Outstanding or exceptional work in terms of understanding, interpretation and presentation

A very high standard of work which demonstrates originality and insight

Demonstrates a high level of understanding and presentation and a degree of originality and insight

Satisfies the minimum requirements

Fails to satisfy the minimum requirements

Reading Strong evidence of independent reading beyond core texts and materials

Evidence of reading beyond core texts and materials

Thorough understanding of core texts and materials

Evidence of having read core texts and materials

Very little evidence of having read any of the core texts and materials

Knowledge of topic Demonstrates insight, awareness and understanding of deeper and more subtle aspects of the topic. Ability to consider topic in the broader context of the discipline

Evidence of an awareness and understanding of deeper and more subtle aspects of the topic

Sound knowledge of principles and concepts

Knowledge of principles and concepts at least adequate to communicate intelligently in the topic and to serve as a basis for further study

Scant knowledge of principles and concepts

Articulation of argument

Demonstrates imagination or flair.

Demonstrates originality and independent thought

Evidence of imagination or flair.

Evidence of originality and independent thought

Well-reasoned argument based on broad evidence

Sound argument based on evidence

Very little evidence of ability to construct coherent argument

Analytical and evaluative skills

Highly developed analytical and evaluative skills

Clear evidence of analytical and evaluative skills

Evidence of analytical and evaluative skills

Some evidence of analytical and evaluative skills

Very little evidence of analytical and evaluative skills

Problem solving Ability to solve very challenging problems

Ability to solve non-routine problems

Ability to use and apply fundamental concepts and skills

Adequate problem-solving skills

Very little evidence of problem-solving skills

Expression and presentation appropriate to the discipline

Highly developed skills in expression and presentation.

Well developed skills in expression and presentation.

Good skills in expression and presentation. Accurate and consistent acknowledgement of sources.

Adequate skills in expression and presentation

Inadequate skills in expression and presentation. Inaccurate and inconsistent acknowledgement of sources.

Source: University of Adelaide 2005

Copyright © Monash University 2011 11

OTHER INFORMATION

PoliciesMonash has educational policies, procedures and guidelines, which are designed to ensure that staff and students are aware of the University’s academic standards, and to provide advice on how they might uphold them. You can find Monash’s Education Policies and Procedures at: http://policy.monash.edu.au/policy-bank/academic/education/index.html

Key educational policies include: Plagiarism (http://www.policy.monash.edu/policy-bank/academic/education/conduct/plagiarism-

policy.html) Assessment (http://www.policy.monash.edu/policy-bank/academic/education/assessment/

assessment-in-coursework-policy.html) Special Consideration

(http://www.policy.monash.edu/policy-bank/academic/education/assessment/special-consideration-policy.html)

Grading Scale (http://www.policy.monash.edu/policy-bank/academic/education/assessment/grading-scale-policy.html)

Discipline: Student Policy (http://www.policy.monash.edu/policy-bank/academic/education/conduct/student-discipline-policy.html)

Academic Calendar and Semesters http://www.monash.edu.au/students/key-dates/principal-dates-2011.html;

Orientation and Transition http://www.monash.edu.au/orientation/index.html; and Academic and Administrative Complaints and Grievances Policy

(http://www.policy.monash.edu/policy-bank/academic/education/management/complaints-grievance-policy.html)

Student ServicesThe University provides many different kinds of support services for you. Contact your tutor if you need advice and see the range of services available at www.monash.edu.au/students

The Monash University Library provides a range of services and resources that enable you to save time and be more effective in your learning and research. Go to http://www.lib.monash.edu.au or the library tab in my.monash portal for more information.

Students who have a disability or medical condition are welcome to contact the Disability Liaison Unit to discuss academic support services. Disability Liaison Officers (DLOs) visit all Victorian campuses on a regular basis Website: http://adm.monash.edu/sss/equity-diversity/disability-liaison/index.html Telephone: 03 9905 5704 to book an appointment with a DLO Email: dlu@monash.edu Drop In: Equity and Diversity Centre, Level 1 Gallery Building (Building 55), Monash University,

Clayton Campus.

Copyright © Monash University 2011 12