Define Purchasing Power Parity (PPP) theory. Based on PPP, would you expect the price of a TV to be the same in India as it is in Australia?

International Finance (FIN 00126) Session 2 2016

Assignment 1


Assessment Details

Assignment due dates and the examination period provided here apply to the Australian study period and may vary for students studying elsewhere. Please confirm dates with your local tutor.


Assignment Submission

Please note that all assignments are to be submitted online via Turnitin, the assignment submission facility of the MySCU site for this unit. The link for submitting assignments are available within ‘Assessment Submission’. If you are uncertain about the submission process please contact the Student Support Team for clarification.


You must use the electronic Assignment Cover Sheet provided in the ‘Assignment Details’ section of MySCU. Download this cover sheet, fill in your details and then make this sheet the first page of your assignment – do not send it as a separate document.


Your assignments must be submitted as Word documents. If you wish to submit in any other file format please discuss this with your lecturer well before the assignment submission date.

As part of a University initiative to support the development of academic integrity, assessments will be checked for plagiarism, and stored in the database for future checking and matching purposes.


Any extension for assignment submission should be requested by email at least 48 hours before the deadline. Late submissions without prior approval will incur a penalty of 10% (of full marks) each day, including weekends.


Assignment 1: Short written response

Due: 11 pm Monday 15 August 2016 (Week 6) (or as instructed by your local lecturer)

Length: 1500 words

Weighting: 20%

Answer the following questions:


1) Define Purchasing Power Parity (PPP) theory. Based on PPP, would you expect the price of a TV to be the same in India as it is in Australia? Give reasons to justify your answer. (5 marks)


2) Collect monthly data on the spot exchange rate between the Australian Dollar and Chinese Yuan from July 2012 to June 2015. Plot the data and briefly comment on the exchange rate behaviour. (5 marks)

3) Discuss 3 factors that affect the exchange rate. Use graphs to explain the changes (5 marks)


4) Define a currency option. Using a well-articulated example show how a currency option might be used to manage currency risk. (5 marks)


The main source material for the assignment is in Topics 2, 3, 4 and 5. The assignment is expected to be of standard quality with respect to spelling, grammar, punctuation, etc. Assignment submitted must be written in your own words and it must be your own work. It should not exceed 1500 words. Severe penalties apply for assignments, which exceed the word limit. The word count excludes references, tables and figures. If the assignment exceeds the word limit, then the following mark deductions will be applied. Please note that the word limits are strictly enforced.


Excess length and penalty

Up to 5% – No deduction

More than 5% – less than15% – 2 marks

More than 15% – less than 30% – 3 marks

More than 30% – Assignment will not be marked and graded as zero


Marking Criteria

Your work will be assessed against the following criteria.

Demonstrated understanding of the concepts – 50%

Use of graphs, tables or mathematics for supporting your answers – 30%

Presentation, coherency, structure, etc. including referencing accuracy – 20%




for question 2 calculation.


Find the exchange rate on or


% exchange rate = ( New exchange rate – Old exchange rate) divide Old exchange rate


comment on exchange rate by compare the price fluctuation between each year




this assignment for words count can be from 1200w to 1500w



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