### Question:

The assignment consists of two parts: Part A of the assignment focus on the financial instruments of financial institutions: QBE Ltd and IAG Ltd. Part B of the assignment focuses on the fundamental of corporate finance. To Successfully complete this project, you will use/apply not only theories studied in TFIN603 but also other appropriate resources.

Part A: QBE and IAG Share Price

1 (25 marks)

a. What is the current price of ordinary shares in QBE Ltd. and IAG Ltd. ? How has each evolved over the last 5 years? Graph each series and discuss their evolution, noting the salient points.

1 (25 marks)

a. What is the current price of ordinary shares in QBE Ltd. and IAG Ltd. ? How has each evolved over the last 5 years? Graph each series and discuss their evolution, noting the salient points.

(10 marks)

b. Define the systematic and unsystematic risk, relative to QBE and IAG. Identify at least twonfactors that affected the systematic risk of the institution in the last 5 years and reflected in thenmovement its share price. Which share price was more volatile, QBE or IAG ? (15 marks)

b. Define the systematic and unsystematic risk, relative to QBE and IAG. Identify at least twonfactors that affected the systematic risk of the institution in the last 5 years and reflected in thenmovement its share price. Which share price was more volatile, QBE or IAG ? (15 marks)

Part B: Corporate Finance

1 (20 marks)

(a) What is the future value of $1200 invested for 3 years at an interest rate of 6% p.a., compounded quarterly? (4 marks)

(b) What is the Effective Annual Rate in part (a)? (4 marks)

(c) What is the present value of an annuity consisting of payments of $265 every six months for 12 years, if the discount rate is 9% p.a., compounded semi-annually? (4 marks)

(d) You deposit $100 into a bank account where it remains for 9 years, at the end of which time the money has grown to $183.85. What is the annual interest rate on the account (5 marks)

(e) If the nominal rate of interest is 11% and the expected inflation rate is 8%, what is the approximate real interest rate? (3 marks)

1 (20 marks)

(a) What is the future value of $1200 invested for 3 years at an interest rate of 6% p.a., compounded quarterly? (4 marks)

(b) What is the Effective Annual Rate in part (a)? (4 marks)

(c) What is the present value of an annuity consisting of payments of $265 every six months for 12 years, if the discount rate is 9% p.a., compounded semi-annually? (4 marks)

(d) You deposit $100 into a bank account where it remains for 9 years, at the end of which time the money has grown to $183.85. What is the annual interest rate on the account (5 marks)

(e) If the nominal rate of interest is 11% and the expected inflation rate is 8%, what is the approximate real interest rate? (3 marks)

2 (20 marks)

1. Two mutually exclusive projects, C and D, will have an initial cost of $20,000 each and are expected to yield the following after‐tax cash flows.

Year C D

1 $4,000 $8000

2 $6,000 $6,000

3 $5,000 $6,000

4 $4,000 $1,000

5 $6,000 $3,000

6 $2,000 $4,000

7 $2,000

8 $2,000

(a) Basedonthepaybacktechnique,ifthemaximumacceptablePaybackPeriodis 4 years, would you accept Project C,Project D,neitherorboth (6 marks)

1. Two mutually exclusive projects, C and D, will have an initial cost of $20,000 each and are expected to yield the following after‐tax cash flows.

Year C D

1 $4,000 $8000

2 $6,000 $6,000

3 $5,000 $6,000

4 $4,000 $1,000

5 $6,000 $3,000

6 $2,000 $4,000

7 $2,000

8 $2,000

(a) Basedonthepaybacktechnique,ifthemaximumacceptablePaybackPeriodis 4 years, would you accept Project C,Project D,neitherorboth (6 marks)

(b) Based on the NPV technique, if the required rate of return is 12%, would you accept Project C Project D, neither or both? (7 marks)

(c) Based

(c) Based

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