Investment analysis about the country - UK In Tutorial Library

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TITLE: Investment analysis about the country - UK

CLASS / COURSE: Financial Analysis


Spreadsheet Assignment

You are an analyst working for an investment bank and you have been asked to produce a country report.  The report will be used to provide background information and specific investment analysis about the country that will allow the bank to make informed investment decisions.


Describe the economic background of this country and issues that might relate to its future performance.

Chart the market performance for this country.  In particular discuss the largest 3 month market rise and the largest 3 month market fall over the period for which you have data. Identify key events and issues that might have contributed to the major rise and fall in the market.

If you had decided to invest in a weighted portfolio of shares in this country (ie. the share market index) what would have been the annual returns and standard deviations for each of the ten year periods and the annualised return and standard deviation for the full 10 year period:

  • Without including the exchange rate exposure
  • With exchange rate exposure
  • Assuming that you had hedged using forward rates at the beginning of each year. Explain another hedge that you might have used and why.

Chart the exchange rate performance compared with the Australian Dollar and the interest rates for both countries.  Given the interest rates for both countries and the exchange rates between the two countries, did covered interest rate parity hold at all times.  Explain whether this is consistent with the current literature.

Determine the price of a call option using the Black-Scholes pricing model with one month to expiry using the forward rate/spot rate and interest rates as at 31 December 2008. The 3 year standard deviation of the spot exchange rate would be a good approximation for volatility (σ). Provide solutions for a range of approximately 10 exercise prices and chart these prices.

When presenting your assignment provide:

  1. A printout of your report containing charts and discussion (no more than 5 pages).
  2. Spreadsheet(s) clearly labelling all columns of data (one file only)


1- The following websites might be a good starting point for background information for your country, but you are expected to look a bit further than this.

Useful excel functions:








Please note you should look up the function help to properly understand these

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