Question

Question 1

Find the website of ‘Australian Ethical’. Using the information on the website (and ensuring that you reference it correctly), answer the following questions:

a) Provide a brief outline of the activities of Australian Ethical (200 words maximum)

b) Using the descriptions in Hunt and Terry (2015) classify Australian Ethical by type of fund. (200 words maximum) (Type of funds: superannuation fund, insurance, hedge fund, public unit trust and private equity fund)

Question 2

Using yield data from the Reserve Bank of Australia website, calculate the prices of 1, 3 and 6 month bank-accepted bills. The price you calculate should be for 28 July 2017. Show all workings for your calculations. Remember to reference your data sources.

Question 3

You are considering the purchase one Telstra Ltd share on 1 July 2017. You will purchase the share on the ASX.

a) Use the Yahoo7 Finance website to find the beta for Telstra.

b) You will need a proxy for return on the market. To get this, calculate the return on the ASX 200 index for the year ended 30 June 2017. Use the Yahoo7 Finance website to collect the ASX 200 data. Show your workings.

c) You will need a proxy for the risk free rate. Use the RBA website to find the return on a two year Government Bond on 30 June 2017. Show your workings.

d) Calculate the discount rate for your Telstra share. Show your workings.

e) Use the ASX website to identify the payment date and amounts of the most recent two dividends.

f) You expect that dividends during your holding period will be the same as those you have received since you purchased the share. You will sell the share on 30 June 2019 and expect to receive $3.050 (ignore transaction costs). Using the discount rate you calculated earlier, what price would you have been willing to pay for your share? Show all workings for your calculations.

Use the Yahoo7 Finance website to find the market price for your Telstra share at close of trading on 30 June 2018. Compare this with your calculated price for a share and decide if you would purchase the share on 1 July 2017 or not. Explain why you would (or would not) purchase Telstra on 1 July 2017.

h) Using a P/E multiple of 11 and the most recent annual earnings per share for Telstra, calculate the price of your Telstra share. Use the most recent annual report for Telstra to identify earnings per share. You can obtain the Telstra annual report from the ‘announcements’ section of the ASX website to locate. Show all workings for your calculations.

Based on this price, would you purchase a Telstra share on 13 August 2018? Explain how you made this decision.