1. Understanding Different Asset Classes (TOTAL 15 MARKS) a) If Daniel is a risk-seeking individual who is looking for high-return investment opportunities, there are numerous ways he can invest his money. Can you describe three distinct types of financial assets that you offer which would be suitable for him? For each of the financial assets you suggest, provide Characteristics, risk, and potential returns with an example (6 marks) b) The development bank of Singapore Limited (DBS) offers a bill facility to corporate clients. The bank website explains the terms and conditions of Bills of Exchange. https://www.dbs.com.sg/corporate/terms/application-for-outward-bill-collection- da/dp-terms-and-conditions Use a diagram to describe the structure of a bank bill. In your explanation, clearly distinguish the roles of the parties associated with the bill issue. (5 marks) c) In 2021, the mining company Silver Mines Limited announced a capital-raising plan to fund its exploration and development activities. The company offered new shares to existing shareholders through a renounceable rights issue. Under the terms of the rights issue, existing shareholders were given the option to buy new shares at a discounted price of AUD 0.11 per share. These renounceable rights allowed shareholders to either exercise their right to buy new shares at the discounted price, or sell their rights to buy to another investor. but it also resulted in a temporary drop in the company's share price. - How does a renounceable rights issue work and what are its benefits and drawbacks? ( 2 marks) What are the factors that contribute to the temporary drop in a company's share price after a capital-raising plan is announced? (2 marks) 2. Central Banks, Monetary Policy and Interest Rates (TOTAL 14 MARKS) a) Australia is a country that has a complex monetary policy framework, which is designed to manage its unique economic circumstances. The Reserve Bank of Australia (RBA) uses a combination of exchange rate management, interest rate policy, and macroprudential regulation to maintain price stability and promote economic growth. Describe the intermediate target for monetary policy in Australia and explain the implementation process of monetary policy in this country. Provide examples of different economic indicators that may give insight into the future stages of a business cycle. Note: You need to provide references for your answer. (6 marks) b) On 3rd May 2023, the Reserve Bank of Australia (RBA) increased the cash rate by 0.25%. The current cash rate is 3.85%. Explain to Daniel how the high cash rate affects imports and exports in Australia and provide an example for your reason. (4 Marks) Obtain monthly data from Fred (https://fred.stlouisfed.org/) and plot the interest rates on 3-month Treasury bill (TB3MS) and 10-year Government bond yield (IRLTLT01USM156N) from Jan 2018 to 2023 (end of April). Determine the shape of the yield curve by using one of the interest rate theories you know and share your opinion on whether the US economy is heading for a boom or for a recession. Explain your choice. Note: If you do not plot the exact date, you will not get any marks