FIN 4033 International Finance Assessment 3 Project: Online Currency Tracking and Analysis
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Description/Paper Instructions ADWC BUSINESS DEPARTMENT ____________________________________________________________________________ FIN 4033: International Finance Assessment 3: Project: Online Currency Tracking and Analysis
HCT Academic Honesty Policy Academic dishonesty will not be tolerated within the HCT. Academic dishonesty includes cheating, plagiarism (copying) or any other attempt to gain an academic advantage in a dishonest or unfair manner. Fin 4033: International Finance Currency Tracking Group Project Report (30%) Final Report Submission Due: Week: TBA Project Goal: A large part of the International Finance course deals with the behavior of exchange rates in the short run as well as in the long run. The course covers the major factors lead to strengthening or weakening of a currency. Furthermore, risks associated with currency movements constitute a core part of the course. It is believed that a practical work in the foreign exchange market complements and strengthens the depth of understanding and applying the theories and concepts discussed in the course. Thus, the goal of this project is to implement learning by doing and to enable students to examine and perform actual practice of the entire process of:
During the course of this project, you will track the currencies of four/five countries (depends on group size) against the USD, research and analyze the underlying causes for the movements in the respective currency exchange rates and evaluate the impact of those various factors affecting exchange rates in the short run (at least 4 weeks of daily transactions) (see project tasks below). Also you will report the long run behavior of the currencies by examining historical data ranging from 10 to 15 years. In your long run analysis, you will obtain annual inflation rates of your chosen country and the US for the given period. By plotting the annual percentage change of the exchange rate of your chosen country against the inflation differential between the two countries you will be able to provide analysis of the relationship between long run exchange rate movements and inflation differentials. This will allow you to assess the relative purchasing power parity theory of exchange rates. You are required to reflect on your results of the relationship between exchange rate movements and inflation differentials. At the end of the period, your team will be required to turn in a professionally prepared report that documents your currency tracking activities over the course of the four weeks and the long run behavior of your currencies over the last 10 to 15 years. Your report would conclude by summarizing your major finds of your study and pointing out key lessons learned from the project. Structure of Final Report Should have the following components: Four components will go into the determination of your grade on this project:
(About one page)
Details of Project Tasks: Individual Contributions There are four major tasks to be performed in the currency tracking project.
Each student will select a currency and track its daily average value in terms of the USD for a period of at least 4 weeks, record and save the results. For example, if your currency is the British pound your rates will be USD/GBP (USD per British pound). Furthermore, each student will prepare a table containing dates and rates, create a line graph of the rates (on the vertical axis) and dates (on the horizontal axis) to be able to see the trend in the movement of the rates. Write a short introduction of the forex market and exchange rates followed by a brief description of the reasons for the observed movements in your currency exchange rate (internet research is required to complete this task).
Obtain data on annual exchange rates relative to the USD for your currency (10 to 15 years). Obtain inflation rates for your currency (for example, if your currency is the British pound get UK inflation rate for 10 – 15 years) and US inflation rates for the same period. Calculate the annual percentage change of the exchange rate and the difference between US inflation and the inflation rate for your currency (this is called the inflation differential). Prepare a table these two variables (annual percentage change of the exchange rate and the inflation differential). Create a graph (percentage change of the exchange rate on the vertical axis and inflation differential on the horizontal axis). Recall that the theory of relative purchasing power parity states that in the long run there is a strong positive correlation between the rate of change of the exchange rate and the inflation differential. Assess the validity of this theory based on the behavior of your graphs. In case of significant deviation from RPPP, suggest reasons for such deviation.
Write a short summary of findings and conclusion Detail Guidelines for individual work Data
Suggested site: https://finance.yahoo.com/currencies
Short Run Analysis:
Data and Long run analysis section
Brief Summary and Conclusion Group Tasks Combining individual work into one single paper In this section the group will combine the individual research work by each member into one paper. At this point the group needs to select one member as a group leader to put their work together by performing the following tasks:
Provided a summary of the main findings of the paper.
Note that the quality of the overall report and NOT the quantity is important. Sample Currencies Anchor Currency (USD)
Note: If you choose AUD you will track USD/AUD (the price of one AUD in terms of USD) For example, on March 21/2020: AUD 1 = USD 0.5800 Here AUD is called the base currency and USD is called the quote currency. In your currency tracking project all of you will use the USD as the quote currency and your chosen currency as the base currency. Fin 4033: Project Report Assessment Criteria (30%)
Group Report Grading Rubric FIN 4033 International Finance Assessment
Grade _____________ FIN 4033 International Finance Assessment |
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