Reference no: EM132839972

MBA7006 Finance of International Business - Cardiff Metropolitan University

PART1 - Portfolio Creation

AIMS

The aim of the assessment is to provide students with a working understanding of the portfolio theory through creating and managing a portfolio from internationally traded assets. The students are also required to critically evaluate the portfolio performance from the knowledge and skills learned from the module.

Learning Outcome 1: Apply the principles of modern portfolio theory when making a rational investment decision.

Learning Outcome 2: Critically evaluate the effectiveness of portfolio evaluation techniques and apply the various approaches to the portfolio.
Learning Outcome 3: Demonstrate an ability to access, analyse and interpret data.

Learning Outcome 4: Create an investment portfolio and confidently present their work to prospective investors.

Learning Outcome 5: Develop critical and analytical skills and the ability to work independently.

ASSESSMENT TASKS

You are a fund manager of an investment bank in the UK. You are planning to construct a portfolio using the following currencies: RMB/GBP (Chinese Yuan per Pound Sterling) and NZD/GBP (New Zealand Dollar per Pound Sterling). You wish to examine and critically evaluate the performance of these currencies from 1 May 2019 to 2 May 2020. For this purpose, you are required to conduct some analyses and write a 3000-word report.

PART A
1. Use Bank of England, Yahoo! Finance and any other websites that offer historical spot foreign exchange data to extract the daily closing currency values from 1 May 2019 to 2 May 2020.

2. Calculate the following:
(a) The daily rate of returns for each of the currencies. Visually examine the performance of the value of the currency and the daily rate of returns for each of the currencies by showing the data on graphs or charts as appropriate.
(b) The maximum and minimum returns for each of the currencies.
(c) The mean returns for each of the currencies.
(d) The variance and standard deviation of returns for each of the currencies.
(e) The covariance of returns between each pair of the currencies.
(f) The correlation coefficients of returns between each pair of the currencies.

3. Based on your results from (a) to (f) and any further analysis you may wish to do, compare and comment the risk and return patterns and characteristics for each of the currencies. Your comments should draw on materials and theories you have learnt in this module. Relate the performance of the currencies to relevant events (e.g. economic, financial or political events) that took place during this period and discuss how they had influenced the performance for each of the currencies. You must give bibliographic references to the sources of your information.

PART B
This section requires you to construct an equally weighted portfolio of the currencies selected above.
1. Calculate the following:
(a) The daily rate of returns of the portfolio. Visually examine the performance of the returns for the portfolio and each of the currencies by showing the data on graphs or charts as appropriate.
(b) The maximum and minimum returns of the portfolio.
(c) The mean, variance and the standard deviation of the portfolio returns.
(d) The covariance and correlation coefficients of returns between each currency and the portfolio.
(e) The coefficient of variation of returns for each currency and the portfolio.

2. Based on your results from (a) to (e), examine and compare the performance of your equally weighted portfolio returns with those of the individual currencies. Comment on your observations, relating to the portfolio theory, and discuss the benefits of diversification across these currencies. You may also apply the portfolio evaluation techniques to evaluate critically the performance of your portfolio with those of the individual currencies.

PART C

This section requires you to draw a conclusion of the portfolio construction and analysis above.

From the viewpoint of a fund manager who wishes to determine whether the currencies that you examined are worth investing in, how useful is the portfolio analysis that you carried out? What limitations do you see in your analysis and results? What further analysis would you wish to carry out?

Attachment:- Finance of International Business.rar