AFW1300 UNIT GUIDE

Money and capital markets

SYNOPSIS: On completion of this unit students should demonstrate an understanding of a financial

system, its operation and component parts; yield curve analysis, the term structure of interest rates,
and exchange rate interaction; sources and types of business finance, short, medium and long term,
domestic and overseas, and associate pricing formulae; the structure and operation of Australian
financial institutions and markets; the major types of risk and the derivative products available to
manage financial risk; the structure, functions and role of prudential supervision in the financial
markets.

Mode of delivery: On-campus

Workload: This is a six credit point unit with three class contact hours a
week through a twelve-week semester. For each six credit point
unit the University expects a student to spend twelve hours a
week in class contact and self-directed study:
http://www.monash.edu.au/pubs/handbooks/policy/policy-4b.html.

Prohibitions: AFC2000, AFF1300, AFG1300

Chief examiner: Dr Nicole Lai Mun Sim

Sunway Campus Coordinator: Dr Nicole Lai Mun Sim

Phone: +603 5514 4930

Email: nicole.lai@buseco.monash.edu.my

Berwick Campus Coordinator: Dr Berty Vidanapathirana

Phone: TBA

Email: berty.vidanapathirana@monash.edu

SEMESTER S1 2011
HANDBOOK ENTRY: http://www.monash.edu.au/pubs/2011handbooks/units/AFW1300.html

www.monash.edu
ACADEMIC OVERVIEW
Learning objectives
The learning goals associated with this unit are to:
1. describe the structure and operation of financial institutions and markets in Australia
2. evaluate short and medium to longer term financial instruments
3. explain government monetary policy and the term structure of interest rates
4. describe the derivative products available to manage financial risk
5. apply critical thinking, problem solving and presentation skills to individual and/or group activities
dealing with money and capital markets and demonstrate in an individual summative
assessment task the acquisition of a comprehensive understanding of the topics covered by
AFW1300.

Graduate attributes
Monash prepares its graduates to be:
1. responsible and effective global citizens who:
• engage in an internationalised world
• exhibit cross-cultural competence
• demonstrate ethical values
2. critical and creative scholars who:
• produce innovative solutions to problems
• apply research skills to a range of challenges
• communicate perceptively and effectively

Assessment summary
ASSESSMENT TASK DUE DATE VALUE

Assessment Task 1: Major Assignment Wednesday 4 May (Week 9) 20%

Assessment Task 2: 4 Online Quizzes Quiz 1 Week 3 (14 March) 10%

Quiz 2 Week 6 (4 April)
Quiz 3 Week 9 (2 May)
Quiz 4 Week 12 (23 May)

Final Examination Official Examination Period 70%

TOTAL 100%

Hurdle requirement
There is a hurdle requirement in this unit. The learning outcomes in this unit require students to
demonstrate in the individual summative assessment task a comprehensive understanding of the
topics covered in the unit. This is demonstrated by the requirement that the student must attain a
mark of at least 50% in the final summative assessment task.

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A student's final mark is normally the sum of the marks obtained in all of the individual assessment
items in the unit. Where a student fails the unit solely because of failure to satisfy the hurdle
requirement, a mark of 48 will be returned for the unit.
Second marking
Where an assessment task is given a fail grade by an examiner, that piece of work will be marked
again by a second examiner who will independently evaluate the work, and consult with the first
marker. No student will be awarded a fail grade for an assessment task or unit without a second
examiner confirming the result.
Note: Exceptions to this are individual pieces of assessment contributing 10% or less of the final
mark, unless the total of such pieces exceeds 30% of the final mark.
Return of final marks for the unit
Faculty policy states that ‘the final mark that a student receives for a unit will be determined by the
Board of Examiners on the recommendation of the Chief Examiner taking into account all aspects of
assessment’.
The final mark for this unit will be released by the Board of Examiners on the date nominated in the
Faculty Calendar. Student results will be accessible through the my.monash portal.
Exam viewing
Feedback on student performance in examinations and other end-of-semester assessment is
required, in accordance with the University procedures on Unit Assessment. For more information,
please see the following URL: http://www.buseco.monash.edu.au/aaf/student/exam-view/index.html.

Learning and teaching approach

This unit will be taught as a two-hour lecture and a one-hour tutorial each week for 12 weeks. The
lecture sessions will cover significant points of the topics (see Unit Schedule), and may be used to
discuss a number of the set problems. It is not intended that the lecturer will cover every aspect of
each topic, but rather provide a framework of the important theoretical concepts and practical
issues. Given this framework students are expected to attend all lecture and tutorial sessions and
participate actively. In order to participate and to gain maximum benefit from the sessions, all the
questions, set for each week, are to be attempted before the tutorial for that week. At times in the
lecture and tutorial sessions the lecturer or tutor will invite students to raise and discuss relevant
issues and areas of concern. Students should take this opportunity, particularly in tutorials, to clarify
areas of difficulty and to contribute actively to the discussion of the model answers to the set of
weekly questions.
Students are expected to spend additional private study time and access the recommend readings,
which are listed in this guide and on Blackboard. In addition to the recommended readings and sets
of weekly questions, a number of past examinations and tests, together with model answers, are
provided on Blackboard. These resources enable students to develop a mastery of the topics
covered by the unit.
To ensure a high probability of completing successfully this unit, students need to approach it in a
systematic way. At a minimum this should involve:
• reading the prescribed material prior to each weekly session;
• preparing solutions to each set of questions prior to the session;
• attending sessions and participating in discussions of model answers;
• reviewing material from other references from time to time; and
• attempting relevant past examination and test questions.

Copyright © Monash University 2011 3

Feedback
Our feedback to you
Students will receive feedback on work in the following ways:
• Feedback on written work will be provided to enable students to improve their knowledge
• Feedback on class presentations will be given after each presentation to enable student to
improve their presentation skills.
• Students will have the opportunities to discuss questions in lectures and tutorials.
• Students will be provided with solutions to tutorial questions.
• Students will be provided with lecture via Blackboard.
• Staff will be available at specific consultation times: these times are available via Blackboard.
Students are strongly recommended to use this opportunity to get substantial feedback.
• Students can also contact teaching staff, on unit related issues, via phone or email
Your feedback to us
Monash is committed to excellence in education and regularly seeks feedback from students,
employers and staff. One of the key formal ways students have to provide feedback is through
SETU, Student Evaluation of Teacher and Unit. The University’s student evaluation policy requires
that every unit is evaluated each year. Students are strongly encouraged to complete the surveys.
The feedback is anonymous and provides the faculty with evidence of aspects that students are
satisfied and areas for improvement.
For more information on Monash’s educational strategy, and on student evaluations, see:
http://www.monash.edu.au/about/monash-directions/directions.html and
http://www.policy.monash.edu/policy-bank/academic/education/quality/student-evaluation-
policy.html.

Previous student evaluations of this unit

If you wish to view how previous students rated this unit, please go to
https://emuapps.monash.edu.au/unitevaluations/index.jsp.

Required resources
Prescribed text available from the University Bookshop
Edirisuriya, P. (2010) Money and capital markets. McGraw-Hill.
Publication for Department of Accounting and Finance, Monash University.
Blackboard (MUSO)
Material used in class together with other information of importance to students will be published
online. In order to access information about this unit in Blackboard you must be enrolled in the unit
and have a valid Authcate Username and Password. Blackboard is accessed through the
my.monash portal at URL: https://my.monash.edu.au/muso/blackboard/login/.
Q Manual
The Q Manual is a student guide for producing quality written work on time. Printed copies are
available at the bookshop or online at URL:
http://www.buseco.monash.edu.au/publications/qmanual/qmanual.pdf.

Calculators
Electronic devices (including calculators) are not permitted in tests and examinations in this unit
unless identified with an “approved for use” label. These labels are available from:

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• Berwick Campus: Jan Ottrey (Building 901, Room 130B)
• Sunway Campus: Course Management Staff (Building 6, Level 4, Room 9)

Recommended resources
Recommended texts and readings
Hunt, B., & Terry, C. (2008). Financial institutions and markets (5th ed.).Thomson.
Kidwell, D. S, Brimble, M., Beal D., & Willis, D. (2007). Financial markets, institutions and money.
John Wiley & Sons Australia, Ltd.
Lewis, M. K., & Wallace, R. H. (1997). The Australian financial system. South Melbourne: Longman.
Mishkin F. S., & Eakins S. G. (2006). Financial markets and institutions (6th ed.). Boston: Addison
Wesley.
Reserve Bank of Australia (1990 – ), Bulletins and Annual Reports.
Valentine, T., Ford G., Edwards V., Sundmacher, M., & Copp, R. (2006). Financial markets and
institutions in Australia (2nd ed.). Frenchs Forest: Pearson Education.
The RBA Web site at: http://www.rba.gov.au provides electronic versions of some RBA publications.

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UNIT SCHEDULE
NB. Model answers to each set of weekly self-study questions, exercises and problems will be explained and discussed at lectures and
tutorials in the following teaching week, except for the set specified for week 12. The model answers to week 12 self-study questions, exercises
and problems will be posted on Blackboard at 5:00pm on the last day the semester.
WEEK DATE TOPIC READINGS QUESTIONS
1 28 FEB The Financial System: Overview Ch 1 Tutorial Questions to Study: Week 1: Ch 1- Q4 and Ch 2 – Q2, Q6,
Financial Institutions and Prudential Ch 2 Q9.
Regulation – Part 1 Visit Web sites: www.apca.com.au; www.apra.gov.au and
www.bis.org

2 7 MAR Financial Institutions and Prudential Ch 3 Tutorial Questions to Study: Week 2: Ch 3 – Q4, Q6, Q8 & Q12.
Regulation – Part 2 Visit Web sites of ANZ Bank, Commonwealth Bank, National Australia
Banks, Westpac Bank and www.standardandpoors.com.au
2. Study the essay question in the lecture 3 notes

3 14 MAR Interest rate Determination: Term and Ch 13 Tutorial Questions to Study: Week 3: Ch 13 – Q1, Q5, Q9, & Q11.
Risk Structure of Interest Rate Visit Web site www.bis.org

4 21 MAR Government Debt, Monetary Policy and Ch 12 Tutorial Questions to Study: Week 4: Ch 12 – Q5, Q6, Q9, & Q11.
Payment System Visit Web site: www.afr.com.au/

5 28 MAR Mathematics of Finance Ch 8 Tutorial Questions to Study: Week 5: Ch 8 – Q2(a)(f), Q3(a)(c),

Q4(a), Q6(a), & Q7 (a)(b)
Visit Web site www.afma.com.au

6 4 APR The Share market Ch 4 Tutorial Questions to Study: Week 6: Ch 4 – Q6 ; Ch 5 – Q7, Q12;
Ch 5 pp 218–233 Ch 6 – Q1
Ch 6 pp 244–261 & Visit Web site www.treasury.gov.au
pp 266–271. Additional reading: Engelen, P., & van Essen, M. (2010).
Underpricing of IPOs: Firm-, issue- and country-specific
characteristics. Journal of Banking & Finance, 34(8),1958–1969.

7 11 APR The Money Market Ch 9 Tutorial Questions to Study: Week 7: Ch 9 – Q5, Q6, Q9 & Q10.
Visit Web site www.sfe.com.au/

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8 18 APR The Bond Market Ch 10 Tutorial Questions to Study: Week 8: Ch 10 –Q3, Q4, Q6, Q10 &
Q13.
Visit Web site www.fitchratings.com.au

MID SEMESTER BREAK 22 APRIL – 29 APRIL

9 2 MAY International Debt Markets Ch 11 Tutorial Questions to Study: Week 9: Ch 11 –Q2, Q4, Q5, & Q11
Visit Web site: www.asx.com.au/

10 9 MAY Foreign Exchange Market Ch 15 Tutorial Questions to Study: Week 10: Ch 15 – Q3, Q4, Q9, & Q11.
Visit Web site: www.rba.gov.au/; www.rbnz.gov.nz/

11 16 MAY Derivative Markets and Risk Management Ch 18 Tutorial Questions to Study: Week 11: Ch 18 – Q1, Q2 Q4, Q7
part 1

12 23 MAY Derivative Markets and Risk Management Ch18 Tutorial Questions to Study: Week 11: Ch 18 – Q8, & Q9
part 2 Visit Web site: www.asx.com.au/; www.cbot.com/
REVISION REVISION Additional reading: Campbell, J. Y., Medeiros, K. S. & Viceira, L. M.
(2010). Global currency hedging. The Journal of Finance, 65(1), 87–
121.

SWOT VAC 30 MAY – 3 JUNE

OFFICIAL EXAMINATION PERIOD 6 JUNE – 24 JUNE

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ASSESSMENT REQUIREMENTS
Assessment Task 1: major assignment
Weighting: 20%

ASSIGNMENT ISSUE:
Choose ONE topic from either: share market, bond market or monetary policy. Select at least two
regions (or subregions) such as Europe, Asia, Africa, (or Eastern / Western Europe, Southeast /
East Asian), and compare the policy or market, discussing the similarities and differences between
the regions.
The topic you chose could be a specific financial instrument/market or broader view of the market
structure. One example is to compare and contrast the monetary policies in USA, Europe and Asia
during the USA subprime mortgage financial crisis, and discuss which policies worked well.

Task details:
The objective of this report is to apply your theoretical knowledge to explain and analyse a current
financial market related issue. Through this process students will gain a broader understanding of
global and domestic financial system related issues.
The assignment report is to be word-processed and presented in a business report format. It should
include in the following order:
• a letter (or a memo) of transmittal (addressed to the tutor stating that the assignment report is
being submitted and also briefly describing in one or two sentences the significance of the
issue/s addressed in the report);
• executive summary;
• table of contents;
• Refer Q Manual that adopts a slightly modified APA style for the reference citation in text (or
footnotes).
• Body of report;
• reference list; and
• appendices.
Please note that there is no need to give purpose, scope, method, limitations and assumptions in
your report.
Students should start their research for the report by reading the prescribed textbook for this
subject: Edirisuriya (2010). Thereafter, students can obtain additional research material from many
sources such as The Australian Financial Review, The Australian and The Age. Students can also
search periodicals such as Business Review Weekly, The Economist, Shares, Personal Investor
and any other business/finance journals or newspapers for additional articles via the Monash
University library on-line databases. Some useful financial web sites are also indicated in this unit
guide. Data could be obtained from the Monash University library databases. After a thorough
literature search on the above lines with adequate research material in hand, students need to use
the marking guide attached to this unit guide in writing their assignment report.
Appendices: Attach any important information such as current newspaper articles, journal articles or
reports relating to the topic in the appendices, which should be numbered as I, II and III so on but
will carry the usual page numbers. However, make sure to attach only very relevant information and
do not attach all reference newspaper/journal articles.
The attached marking guide structure should be used as a guide to writing your report. Students
must retain a copy of the assignment for their reference.

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Word limit: 2,000 (show word count on title page). Marks will be deducted for excessive length.
The number of words used in the letter of transmittal, the executive summary, the table of contents,
footnotes, appendices and reference list are excluded from the word limit of 2,000 words.
Due date: Wednesday 4 May by 5:00pm (Week 9)
Group/Individual: Students can choose to complete this assignment as a group OR individual
assessment task. A maximum of two people per group is permitted. Students can ONLY form a
group with other students in their tutorial class.
Submission details:
Hardcopy assignments should be submitted to your tutor or as instructed by your tutor. Electronic
submission is not permitted.
Return of marks:
Marked assignments will be returned to students during tutorials in Week 12. Students who do not
attend Week 12 tutorials may collect assignments from their tutor during consultation times from
Week 12 onwards.

Faculty style guide

Work submitted for these assessments must follow the Faculty Style as outlined in the Faculty Q
Manual. Copies of this Manual can be obtained at the bookshop or on line at URL:
http://www.buseco.monash.edu.au/publications/qmanual/qmanual.pdf.
Penalties for late lodgement
A maximum penalty of two marks allocated to the assessment tasks will be deducted for each day
they are late.
Applications for extension of time
Applications for an extension of time allocated to an assessment task must be made by completing
the application form found at URL. http://www.buseco.monash.edu.au/student/exams/speccon.html.
The form must be submitted to the Chief Examiner for approval.
Assignment coversheet
Work submitted for assessment MUST be accompanied by a completed and signed assignment
coversheet, available at URL: http://www.buseco.monash.edu.au/student/forms/assessment-
coversheet.doc. In the case of group assignments, each member of the group must complete and
sign a separate assignment coversheet.

Assessment Task 2: online quizzes

Weighting: 10% (2.5% each)
Task details:
Students are required to take four online quizzes accessed via Blackboard.
An online quiz must be completed by students during teaching Weeks 3, 6, 9, and 12, between the
hours of 9:00am AEST (Monday) and 8:00pm AEST (Friday), of the respective weeks (please
refer to dates for further details). Students can only sit each online test once. The quizzes will be
randomly constructed from a database consisting of a large number of multiple choice questions.
Failure to sit any of the quizzes during the relevant teaching weeks will result in the student
receiving a grade of zero for that particular quiz. The quizzes have been developed to ensure all
students are familiar with the lecture and tutorial material throughout the duration of the course. We

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trust that students will abide by a strict honour code and will not have anyone other than themselves
undertake the quiz. Any breech of this code that is brought to the Unit Leaders attention and where
sufficient evidence exists will result in disciplinary action.
Date:
Quiz 1: Week 3 between 9:00am AEST (Monday, 14 March) and 8:00pm AEST (Friday, 18 March).
Quiz 2: Week 6 between 9:00am AEST (Monday, 4 April) and 8:00pm AEST (Friday, 8 April).
Quiz 3: Week 9 between 9:00am AEST (Monday, 2 May) and 8:00pm AEST (Friday, 6 May).
Quiz 4: Week 12 between 9:00am AEST (Monday, 23 May) and 8:00pm AEST (Friday, 27 May).
Materials examinable:
Quiz 1: materials covered in lectures and prescribed reading in weeks 1 & 2.
Quiz 2: materials covered in lectures and prescribed reading in weeks 3, 4 & 5.
Quiz 3: materials covered in lectures and prescribed reading in weeks 6, 7 & 8.
Quiz 4: materials covered in lectures and prescribed reading in weeks 9, 10 & 11.
Return of marks:
Marks will be made available to students immediately after the completion of each online quiz.
Special consideration Class Test ≤ 10%
If an application for special consideration is received within two full days after a mid-semester test
weighted at 10 per cent or less of the final mark; and the application is approved by the Chief
Examiner, then the Chief Examiner will have the option of either setting an equivalent make-up test
prior to the examination period or to have the weighting of the final examination increased by the
weighting of the mid-semester test.

Examination
Weighting: 70%
Duration: 3-hour examination
Task details:
This will be a closed book examination and approved calculators will be permitted.
Date and location:
This examination will be held during the official examination period. The examination timetable
which provides full details of the examination schedule can be accessed through the my.monash
portal.
Materials examinable:
All lecture materials, tutorial materials and prescribed reading.

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ASSESSMENT CRITERIA GRADING DESCRIPTORS
High Distinction Distinction Credit Pass Fail
(80%+) (70 – 79%) (60 – 69%) (50 – 59%) (Less than 50%)

General Outstanding or A very high standard of Demonstrates a high level Satisfies the minimum Fails to satisfy the
description exceptional work in terms work which demonstrates of understanding and requirements minimum requirements
of understanding, originality and insight presentation and a degree
interpretation and of originality and insight
presentation

Reading Strong evidence of Evidence of reading Thorough understanding Evidence of having read Very little evidence of
independent reading beyond core texts and of core texts and materials core texts and materials having read any of the
beyond core texts and materials core texts and materials
materials

Knowledge of topic Demonstrates insight,
awareness and
understanding of deeper
and more subtle aspects
of the topic. Ability to
consider topic in the
broader context of the
discipline
Evidence of an awareness Sound knowledge of Knowledge of principles Scant knowledge of
and understanding of principles and concepts and concepts at least principles and concepts
deeper and more subtle adequate to communicate
aspects of the topic intelligently in the topic
and to serve as a basis for
further study

Articulation of Demonstrates imagination Evidence of imagination or Well-reasoned argument Sound argument based on Very little evidence of
argument or flair. flair. based on broad evidence evidence ability to construct
Demonstrates originality Evidence of originality and coherent argument
and independent thought independent thought

Analytical and Highly developed Clear evidence of Evidence of analytical and Some evidence of Very little evidence of
evaluative skills analytical and evaluative analytical and evaluative evaluative skills analytical and evaluative analytical and evaluative
skills skills skills skills

Problem solving Ability to solve very Ability to solve non-routine Ability to use and apply Adequate problem-solving Very little evidence of
challenging problems problems fundamental concepts and skills problem-solving skills
skills

Expression and Highly developed skills in Well developed skills in Good skills in expression Adequate skills in Inadequate skills in
presentation expression and expression and and presentation. expression and expression and
appropriate to the presentation. presentation. Accurate and consistent presentation presentation. Inaccurate
discipline acknowledgement of and inconsistent
sources. acknowledgement of
sources.

Source: University of Adelaide 2005

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OTHER INFORMATION

Policies
Monash has educational policies, procedures and guidelines, which are designed to ensure that
staff and students are aware of the University’s academic standards, and to provide advice on how
they might uphold them. You can find Monash’s Education Policies and Procedures at:
http://policy.monash.edu.au/policy-bank/academic/education/index.html
Key educational policies include:
• Plagiarism (http://www.policy.monash.edu/policy-bank/academic/education/conduct/plagiarism-
policy.html)
• Assessment (http://www.policy.monash.edu/policy-
bank/academic/education/assessment/assessment-in-coursework-policy.html)
• Special Consideration (http://www.policy.monash.edu/policy-
bank/academic/education/assessment/special-consideration-policy.html)
• Grading Scale (http://www.policy.monash.edu/policy-
bank/academic/education/assessment/grading-scale-policy.html)
• Discipline: Student Policy (http://www.policy.monash.edu/policy-
bank/academic/education/conduct/student-discipline-policy.html)
• Academic Calendar and Semesters http://www.monash.edu.au/students/key-dates/principal-
dates-2011.html;
• Orientation and Transition http://www.monash.edu.au/orientation/index.html; and
• Academic and Administrative Complaints and Grievances Policy
(http://www.policy.monash.edu/policy-bank/academic/education/management/complaints-
grievance-policy.html)

Student Services
The University provides many different kinds of support services for you. Contact your tutor if you
need advice and see the range of services available at www.monash.edu.au/students
The Monash University Library provides a range of services and resources that enable you to save
time and be more effective in your learning and research. Go to http://www.lib.monash.edu.au or the
library tab in my.monash portal for more information.
Students who have a disability or medical condition are welcome to contact the Disability Liaison
Unit to discuss academic support services. Disability Liaison Officers (DLOs) visit all Victorian
campuses on a regular basis
• Website: http://adm.monash.edu/sss/equity-diversity/disability-liaison/index.html
• Telephone: 03 9905 5704 to book an appointment with a DLO
• Email: dlu@monash.edu
• Drop In: Equity and Diversity Centre, Level 1 Gallery Building (Building 55), Monash University,
Clayton Campus.

Copyright © Monash University 2011 12