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Financial Markets And Institutions Question Paper

Financial Markets And Institutions

Course:Bachelor Of Commerce

Institution: Kenyatta University question papers

Exam Year:2009

KENYATTA UNIVERSITY
UNIVERSITY EXAMINATIONS 2008/2009
SECOND SEMESTER EXAMINATION FOR THE DEGREE OF BACHELOR
COMMERCE
BAC 305: FINANCIAL MARKETS AND INSTITUTIONS

DATE: Thursday 27th August, 2009
TIME: 11.00 a.m. – 1.00 p.m.

INSTRUCTIONS
Answer ALL questions.

QUESTION ONE
(i)
Differentiate between the following terms as used in Financial markets:
(a)
Primary market and Secondary market. [2 marks]
(b)
Over-the-Counter market and organized exchange. [2 marks]
(c)
Transaction exposure and translation exposure. [2 marks]
(d)
Contango operations and Backwardation. [2 marks]
(e)
Cum and Ex. [2 marks]

(ii)
Maintaining price stability is one of key roles of the Central Bank of Kenya. One of the key prices is Interest Rates. Discuss Three Theories that explain the term structure of Interest Rates. [12 marks]

(iii) Financial Intermediation is key in any Financial System. Explain the rationale of Financial Intermediation. [8 marks]

QUESTION TWO
(i)
The stock market has come under sharp focus in the recent times. Discuss the functions of Nairobi Stock Exchange. [6 marks]
(ii)
One key determinant of Capital Market efficiency is the size of the stock market as indicated by the number of firms quoted on the stock market. Explain factors that have caused low quotation in Kenyan stock market. [8 marks]

QUESTION THREE
(a)
Explain the following terms as used in Exchange rates:
(i)
Direct quote [1 mark]
(ii)
Spot Rate [1 mark]
(iii)
Forward Rate [1 mark]
(iv)
Economic exposure [1 mark]

(b)
Firms engaging in International trade MUST cushion themselves against Instability of Exchange rate. Discuss Techniques Firms can use to reduce or manage Transaction exposure. [12 marks]

QUESTION FOUR
The following firms are Important in International Financial System. Briefly describe their role:
(i)
International Finance Corporation. [3 marks]
(ii)
International Bank for Reconstruction and Development (IBRD) [4 marks]
(iii)
International Development Agency. [3 marks]

Financial Markets And Institutions Question Paper

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