Study Unit: BKF2321 and BKF 2320 Accounting for Bankers(BKF 2321: 4 credits / BKF 2320: 2 credits)Assignment – 100 marks Deadline Friday 14th January 2022NOTE: Students are to provide answers for questions 1 and 2. Students can choosebetween questions 3 or 4. Accounting for Bankers 1 only have to present questions 1 and2
Question
1a (20 marks)A portfolio manager, Dellorto and Partners Limited, needs to reposition one of its bond portfolioswith the introduction of a Daimler AG Bond that offers an 8.5% coupon and matures on the 18th ofJanuary,2031, and issued in USD (ISIN code: US233835AQ08). The portfolio manager consideredbuying certain tranches over 2021. The coupon is payable half yearly on 30th June and 31stDecember.On the 1st of March 2021 the company purchased a nominal amount of 50,000 nominal at USD 102.75CUM DIV. This was followed by another purchase on the 1st of May 2021 for 30,000 nominal atUSD103.25 CUM DIV and a further 20,000 nominal at USD103.00 on the 30th of June EX DIV. On the1st of November 2021, the portfolio manager, seeing that yields have remained the same in themarket, sold 40,000 nominal at 104.00 CUM DIV.Requirement:Prepare the investment account (combined capital and interest account) showing all calculations tothe nearest US dollar, for the year ending 31st December 2021 (assuming that it is the end of the year)in the books of Dellorto and Partners Limited using:Average cost method (AVCO) OR First-In-First-Out cost method (FIFO).
Question 1b (5 marks)Give a brief explanation of what CUM DIV and EX DIV represent? Can investment managers /investors utilise cum div and ex div in their trading strategies?
Question 2 (50 Marks) Given your recent appointment as one of the analysts within a fund management company that has aMaltese-based equity fund, the Fund management executives want you to deliver your opinion onwhether to take up a position in either of APS Bank Plc and Lombard Bank Malta plc basing your viewon the 2020 financial statements for each respective financial institution.They have asked you to provide a report about the Bank and an evaluation of its overall position. Inthe report you need to provide a ratio analysis and commentary on the following ratio classes:1. Liquidity2. Profitability3. Capital Structure4. Investment
You have also been asked to comment particularly on the Banks return on equity. The managementboard has also asked for you to evaluate the Banks Capital structure from a regulatory perspectiveand whether it reaches the requirements that the ECB establishes. You are to conclude on whetheryou are to recommend or not and upon which criteria you have taken your decision. (Maximum wordcount: 1,500).
Choose one of the following questions:
Question 3 (25 marks)Banking has become a highly regulated industry, particularly after the credit crisis of 2008. What Isthe Role of European Central Bank in monitoring the European banking sector? What is the JointSupervisory Team (JST) and what is its role? (Maximum word count: 500 words).
Question 4 (25 marks)The management of risk within banks is mainly formulated through regulation. However, there areinvestment instruments / contracts that are utilised in addressing risks, such as derivatives. Give abrief overview of what are derivatives and how they are used to manage risk in banks? (Maximumword count: 500 words).
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