Posted: May 3rd, 2023

ECONOMICS AND FINANCE MONEY BANKING AND FINANCE U22053 COURSEWORK ASSIGNMEN

ECONOMICS AND FINANCE MONEY BANKING AND FINANCE U22053 COURSEWORK ASSIGNMENT 12019-20Unit
2| P a g eCOURSEWORK ASSIGNMENT1Thisis an individual assignment. Youare required to answer all partsof the assignment. The hand-in date for the assignmentis1 NOVEMBER2019.The Intended Learning Outcomes of the Assignment are:Examine key features of the term and risk structure of interest rates.Evaluate and explain movements of the term structure over various ranges and its implications for lenders and or borrowers.Assignment(a) Explain and evaluate what is meant by the term structure and risk structure of interest rates. Why do yield curves sometimes go up and over one range and down and over another range? (40 marks)(b) How does the liquidity preference theory differ from the market expectations theory? What effect does this difference have on the term structure under the liquidity preference theory? (30 marks)(c) Assume the following yields currently exist for the following bonds:BondsYield to Maturity___________________________________________Long-term Treasury bonds4.00%Long-term AAA Corporate bonds7.00%Long-term BBB Corporate bonds8.00%___________________________________________Assume the following are normal yield spreads:(i) Long term AAA Corporation bonds –long-term Treasury bonds = 150 basis points (ii) Long term BBB Corporation bonds –long-term AAA Corporation bonds = 50 basis points.In order for an investor to profit from abnormal yield spreads, explain what should done in each case.(30 marks)Required:Explain and demonstrate your answer in an essay of no more than 1,000 words in total.
3| P a g eAssignmentGuideThe background material for this assignment principally relates to lectures 1 and 2 of the module. An understanding of the assigned chapter readings is also helpful for writing the assignment. Your answer to the questions should be based on the assigned reading, as indicated. A good answer should express your own view of what causes the term structure of interest rates to move up one range and then over another and to provide reasoned justification for the position adopted drawing on the insights of the relevant theory(ies). The assignment should be typed written on one side of the paper only. Please ensure that your assignment is properly referenced.Avoid the temptation of presenting the discussion under separate headings. I expect to see coherent and logical communication of ideas and economic and financial concepts with linkages between the central points of the question. The marks will be allocated as follows:Relevance of content, structure and logical development40%Demonstrable knowledge of the topic25%Use of supporting literature and examples from financial systems15%Structure, and connectedness between all parts of the discussion10%Strength of conclusion 10%Useful ReferencesCecchetti, S. and Schoenhholtz, K. (2018) Money, Banking and Financial Markets (4thed). McGraw-Hill Irwin.Bekaert, G., and R.J. Hodrick(2001). Expectations Hypotheses Tests, Journal of Finance, 56, 1357-1394. Campbell, J.Y., and R.J. Shiller (1991). Yield Spreads and Interest Rate Movements: A Birds Eye View, Review of Economic Studies, 58, 495-514. Stambaugh, R.F. (1988). The Information in Forward Rates: Implications for Models of the Term Structure, Journal of Financial Economics, 21, 41-70. Culbertson, J. (1957) The term structure of interest rates, Quarterly Journal of Economics, 4, 485-517.Fama, E. (1976) Forward Rates as Predictors of Future Spot Rates. Journal of Financial Economics, 3, 361-377.Fama,E. (1984) The information in the term structure, Journal of Financial Economics, 13, 4, 509-528.Malkiel, B. (1962) Expectations, Bond Prices, and the term structure of interest rates, The Quarterly Journal of Economics, 76, 2, 197-218.See Bank of England’s website at www.bankofengland.co.uk
4| P a g eHand-in DateThe hand-in date for Coursework Assignment1is 1NOVEMBER2019by 23:56.The coursework report must be submitted via theMoodledropbox.Note: This is the latest date we are allowed to give for handing in the assignment. No extensions beyond this date are possible.Late Submission of CourseworkCoursework submitted after the published submission date without a valid Extenuating Circumstances Form (ECF), but within twenty working days of that date, will be marked. The mark awarded will be limited to the unit pass mark (40% unless otherwise specified in the unit handbook).Coursework submitted more than twenty working days after the published submission date will not be marked, and a mark of zero will be recorded on the student’s record. It will be recorded as a non-submission.Students are strongly advisedto keep a copy of their work. Corruption of computer disks is not an adequate excuse for late hand in,as work should be adequately backedup.Word CountThe coursework word count is aMAXIMUM OF 1,000WORDS(THERE IS NO ±10% MARGIN) excluding reference list, bibliography, appendices, the cover page, abstract, glossary and list of tables, figures, charts and abbreviation. Tables are expected to be primarily for the presentation of numerical data. Work that exceeds 1,000 words will not be read beyond the stated word count.The word count should be stated at the top of your submission. A falsely stated word-count is an assessment offence, which will be referred to PBS Student Assessment and Assessment Regulations Lead.FormattingThe work should be word processed. Font size should be between 12 and 14 and ‘easy to read’ e.g. Calibri, Arial, Times New Roman. Line spacing should be between 1.5 and 2 with (approx.) 4 cm margins all round. The Header must include the student number and the Footer must include a page number. There are no extra marks for excessive presentation; for example elaborate graphics on the cover sheet.

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