1. What factors caused the Global Financial Crisis? Describe three factors in detail. (You need to reference at least 2 sources in your discussion)
2. Describe two consequences of the Global Financial Crisis in detail. (You need to reference at least 2 sources in your discussion)
3. Briefly describe how the Global Financial Crisis affected the banking sector in the US and Australia. (You need to reference at least 2 sources in your discussion)
4. The Commonwealth Bank issues bonds on the capital market to raise financing for its loans.
a) How much financing will the Commonwealth Bank raise if it issues 500, 5-year bonds that pay an annual coupon of 6% and have a face value of $1000 if yields on bonds of similar risk and maturity are 7%?
b) What will happen to the price of the bonds in a) if in 1 year the credit rating of the Commonwealth Bank is increased from AA to AAA? Why?
5. Apple Inc. (APPL share code) issues bank bills on the money market to raise short-term financing for its operations.
a) How much financing would Apple raise if it issued a bank bill that has a maturity of 180 days, a face value of $50 million and was issued at a rate of 5%? The acceptance fee is 50 basis points.
b) Do you think Apple Inc. should have issued a commercial paper rather than a bank bill? Explain why or why not.
6. The ANZ Bank (Share code: ANZ.AX) expects to pay a dividend of $0.91 today and dividends are expected to grow at 6% forever. The required return on Commonwealth Bank shares is 9%. Based on this information would you buy the share today? (Base your answer on current market data for Commonwealth Bank shares)
Chapter 12 Viney, Case Studies in Financial Crises, "Financial Market Essentials",(2011) McGraw and Hill (this is available on the portal under assessments).