Individual Assignment

$6.00

FINM 7406 Individual Assignment
Due date: 11am on 11 October 2018 (Thursday)

Weight: this assignment is out of 20 marks and is worth 20% of your final grade

YOUR INSTRUCTIONS
• There are two parts to this assignment.
a) For Part 1: You will need to upload your assignment via the link on Blackboard. The file
must be in PDF. You can submit your assignment multiple times until the due date.
However, only the last submission will be marked. You would also need to submit this
file through TurnItIn for plagiarism analysis (see more information below).
b) For Part 2: you need to submit your designed Excel Spreadsheet via the link on
Blackboard.
• Please make sure you have your full name and student number on every page of your
assignment (i.e., insert a Header).
• Your Word document should be typed in Times New Roman font, size 12. The
assignment should be double spaced and have margins of 2.54 cm.
• Teaching staff will not answer any questions regarding the assignment as this gives
students an unfair advantage over others. However, you may post any questions to the
assignment discussion board on BlackBoard and they will be answered there.
• Note that your assignment will be analysed for plagiarism using TurnItIn. Once you are
satisfied with the TurnItIn similarity report for your PDF file, that copy becomes your

final copy. See for instructions https://www.library.uq.edu.au/library-services/turnitin-
assignments (link on BB with assignment)

• Late submissions will lose marks as per the ECP.
• Please ensure you reference appropriately and correctly.
• Please start each question on a separate page.
• In terms of word count, please use a maximum of 150 words per mark as a guide. For
example, 2 marks = 300 words max)

Part 1 International Monetary System [15 marks]
In this part of the assignment, you will be investigating the Blockchain Technology and
cryptocurrency market.

1) What are the opportunities and challenges in regards to applying Blockchain technology to
the financial industry? (2 marks)

2) Using daily close data, please plot the following two exchange rates in the same chart:
i) exchange rate between VEF (Venezuelan Bolivar) and USD from 1 July 2013 and 1
July 2018; and
ii) exchange rate between Bitcoin (BTC) and USD from 1 July 2013 and 1 July 2018;
Indicate one specific point on each of these two lines where the trend changes, and provide
some reason(s) why this is the case.
(Hint: Please clearly mark the legend and the relevant information on the axes, and
provide data sources. You can use the left axis for the VEF/USD exchange rate, while
using the right axis for the BTC/USD exchange rate. Please note that you should create a
chart on your own rather than copying from other sources.). (4 marks)

3) Based on the data you collected for VEF/USD, and Bitcoin/USD between 1 July 2013 and 1
July 2018, please calculate the volatility of each currency pair and comment on which
currency pair is more volatile? (2 marks)

4) Do you agree with the statement below? Why and Why not? (3 marks)
“Given the inflation in Venezuela was well above 10,000% in 2017, Venezuela should adopt a
cryptocurrency such as BitCoin as a national currency?”
[Hint: Your answer should not be limited to your findings in Questions 2 and 3.]
5) Do you think Initial coin offering (ICO) is a Ponzi scheme? Why or why not? (2 marks)

Note: 2 marks will be allocated for correct grammar and clear and logical writing.

Part 2: International Portfolio Theories (5 marks) – Q6
Table 1 shows the returns and risks for Country A, Country G, and Country H between 1970
and 2018.

Country A Country G Country H
Mean Return 0.008 0.008 0.012
Standard deviation (Returns) 0.073 0.064 0.103
Annual Mean 9.34% 9.79% 14.54%
Annual Std. dev. 25.25% 22.11% 35.64%
Variance 0.064 0.049 0.127
Covariance between Countries
A, G 0.0020
A, H 0.0034
G, H 0.0024
Figure 1 shows the efficient frontier of these three assets.

Please design an Excel spreadsheet to calculate the optimal portfolio weight for each country
if we want maximise our returns while achieving target sigma of
Q6a): 0.1986
Q6b): 0.2890
Q6c): 0.4400
0.0900
0.1000
0.1100
0.1200
0.1300
0.1400
0.1500

0.1400 0.1900 0.2400 0.2900 0.3400 0.3900
Portfolio Return (%pa)

Portfolio Risk (% pa)
Efficient Frontier (1970 – 2018)

Hint: Please use solver in Excel to solve this question. Please note that portfolio weights are
not restricted to positive values only.
Please save your answer as scenarios in your Excel spreadsheet. For example, please save
your answer for (Q6a) as “Q6a”.

Please fill out the following table in your designed spreadsheet. For Part 2, you only need to
submit your designed spreadsheet (no other files, i.e., PDF) via Blackboard.
Target Sigma Portfolio Weight
for Country A

Weight for
Country G

Weight for
Country H

Q6a): 0.1986
Q6b): 0.2890
Q6c): 0.4400

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Description

FINM 7406 Individual Assignment
Due date: 11am on 11 October 2018 (Thursday)

Weight: this assignment is out of 20 marks and is worth 20% of your final grade

YOUR INSTRUCTIONS
• There are two parts to this assignment.
a) For Part 1: You will need to upload your assignment via the link on Blackboard. The file
must be in PDF. You can submit your assignment multiple times until the due date.
However, only the last submission will be marked. You would also need to submit this
file through TurnItIn for plagiarism analysis (see more information below).
b) For Part 2: you need to submit your designed Excel Spreadsheet via the link on
Blackboard.
• Please make sure you have your full name and student number on every page of your
assignment (i.e., insert a Header).
• Your Word document should be typed in Times New Roman font, size 12. The
assignment should be double spaced and have margins of 2.54 cm.
• Teaching staff will not answer any questions regarding the assignment as this gives
students an unfair advantage over others. However, you may post any questions to the
assignment discussion board on BlackBoard and they will be answered there.
• Note that your assignment will be analysed for plagiarism using TurnItIn. Once you are
satisfied with the TurnItIn similarity report for your PDF file, that copy becomes your

final copy. See for instructions https://www.library.uq.edu.au/library-services/turnitin-
assignments (link on BB with assignment)

• Late submissions will lose marks as per the ECP.
• Please ensure you reference appropriately and correctly.
• Please start each question on a separate page.
• In terms of word count, please use a maximum of 150 words per mark as a guide. For
example, 2 marks = 300 words max)

Part 1 International Monetary System [15 marks]
In this part of the assignment, you will be investigating the Blockchain Technology and
cryptocurrency market.

1) What are the opportunities and challenges in regards to applying Blockchain technology to
the financial industry? (2 marks)

2) Using daily close data, please plot the following two exchange rates in the same chart:
i) exchange rate between VEF (Venezuelan Bolivar) and USD from 1 July 2013 and 1
July 2018; and
ii) exchange rate between Bitcoin (BTC) and USD from 1 July 2013 and 1 July 2018;
Indicate one specific point on each of these two lines where the trend changes, and provide
some reason(s) why this is the case.
(Hint: Please clearly mark the legend and the relevant information on the axes, and
provide data sources. You can use the left axis for the VEF/USD exchange rate, while
using the right axis for the BTC/USD exchange rate. Please note that you should create a
chart on your own rather than copying from other sources.). (4 marks)

3) Based on the data you collected for VEF/USD, and Bitcoin/USD between 1 July 2013 and 1
July 2018, please calculate the volatility of each currency pair and comment on which
currency pair is more volatile? (2 marks)

4) Do you agree with the statement below? Why and Why not? (3 marks)
“Given the inflation in Venezuela was well above 10,000% in 2017, Venezuela should adopt a
cryptocurrency such as BitCoin as a national currency?”
[Hint: Your answer should not be limited to your findings in Questions 2 and 3.]
5) Do you think Initial coin offering (ICO) is a Ponzi scheme? Why or why not? (2 marks)

Note: 2 marks will be allocated for correct grammar and clear and logical writing.

Part 2: International Portfolio Theories (5 marks) – Q6
Table 1 shows the returns and risks for Country A, Country G, and Country H between 1970
and 2018.

Country A Country G Country H
Mean Return 0.008 0.008 0.012
Standard deviation (Returns) 0.073 0.064 0.103
Annual Mean 9.34% 9.79% 14.54%
Annual Std. dev. 25.25% 22.11% 35.64%
Variance 0.064 0.049 0.127
Covariance between Countries
A, G 0.0020
A, H 0.0034
G, H 0.0024
Figure 1 shows the efficient frontier of these three assets.

Please design an Excel spreadsheet to calculate the optimal portfolio weight for each country
if we want maximise our returns while achieving target sigma of
Q6a): 0.1986
Q6b): 0.2890
Q6c): 0.4400
0.0900
0.1000
0.1100
0.1200
0.1300
0.1400
0.1500

0.1400 0.1900 0.2400 0.2900 0.3400 0.3900
Portfolio Return (%pa)

Portfolio Risk (% pa)
Efficient Frontier (1970 – 2018)

Hint: Please use solver in Excel to solve this question. Please note that portfolio weights are
not restricted to positive values only.
Please save your answer as scenarios in your Excel spreadsheet. For example, please save
your answer for (Q6a) as “Q6a”.

Please fill out the following table in your designed spreadsheet. For Part 2, you only need to
submit your designed spreadsheet (no other files, i.e., PDF) via Blackboard.
Target Sigma Portfolio Weight
for Country A

Weight for
Country G

Weight for
Country H

Q6a): 0.1986
Q6b): 0.2890
Q6c): 0.4400