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Banking and Finance | Assignment

   

Added on  2020-12-24

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BANKING AND FINANCE
Banking and Finance | Assignment_1

Table of ContentsINTRODUCTION...........................................................................................................................1PART A...........................................................................................................................................11.Current price of ordinary shares in AMP an CBA and their evolution over 5 years:........12. Royal commission inquires into financial institution activities affecting Systematic andunsystematic risk....................................................................................................................2PART B............................................................................................................................................31. Distinguishing between Required rate of return and IRR..................................................32. Determination of Net present value of projects and explaining there acceptability:........54. Change in discounting and it effect on projects.................................................................75. Circumstances offering different recommendations under NPV and IRR.........................8CONCLUSION................................................................................................................................9REFERENCES..............................................................................................................................10
Banking and Finance | Assignment_2

INTRODUCTION The share market of a nation is governed by many sources and is effected by variousfactors. In this project share price of AMP limited and Commonwealth bank of Australia ispresented along with price evolution over 5 years and factors effecting it. Along with this,impact of news from royal commission on the share prices of both above mentioned institutes isalso determined. In the present report, capital budging technique of net present value is used to determineprofitability of two project for an investment by the company. The project which will give apositive NPV will be selected. For same project Internal rate of return is also calculated toidentify its potentiality for investment. PART A1.Current price of ordinary shares in AMP an CBA and their evolution over 5 years:Current Market Price of Share of AMP: $144.08illustrator 1: Graphical representation of share rive evolution of AMPSource :(AMP Limited (AMP.AX))Interpretation: From the above graph it can be stated that share prices of AMP Limited have seen manyup and down in past 5 years (AMP Limited (AMP.AX),2018). For year 2013 price per share ofthis company was revolving around $3. with end month of April in 2014 it reached to $4 (Banking royal commission, 2018). for this whole years it the share price remained in figure of$4 dollars with minor changes. In 2015 it rose up to $5 and was same for 4 months. In mid-year1
Banking and Finance | Assignment_3

it again fell down to 4.92. reaching at 5 in few months of 2015 it continued in $4 for remainingtime. For year 2016-2017 there was no major changes in price per share with minor fluctuationsit was in figure of $4 only. In 2018 prices started to fell down it was $3.92 in March 2018 and byend of month of August it reached to $3.26.Current Market Price of Share of CBA: $71.92Illustration 2: Graphical representation of share rive evolution of CBASources: (Commonwealth Bank of Australia (CBA.AX))Interpretation: Fore above graph it can be interpreted that by end of 2013 price per share of CBA was56.23 and for year ending 2014 it reached to 71.62. at last of 2015 the price per share fell downto 66.62 (Commonwealth Bank of Australia (CBA.AX),2018). in 2106 it again got hike andreached to 74.76 by year ending . In 2018 it have seen many fluctuations and up-down due toinvestigation of Royal commission and for month of August 2018 the price was 71.91.2. Royal commission inquiries into financial institution activities affecting Systematic andunsystematic riskRoyal commission for banking was established in December month of 2017 to enquireinto banks and financial service firms to reveal malpractices. Main objective of this was toinvestigate engagement in misconduct by financial institution of Australia. Systematic risk: this is purely related with investment. In there is inflation a person caninvest in securities in economic sector which is resistant to price rises. The share prices of banks2
Banking and Finance | Assignment_4

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