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Cfm 309 Financial Institutions And Markets Question Paper

Cfm 309 Financial Institutions And Markets

Course:Bachelor Of Commerce

Institution: Kca University question papers

Exam Year:2011

UNIVERSITY EXAMINATIONS: 2011/2012
YEAR 3 EXAMINATION FOR THE BACHELOR OF COMMERCE
CFM 309 FINANCIAL INSTITUTIONS AND MARKETS (SATURDAY)
DATE: APRIL 2012 TIME: 2 HOURS
INSTRUCTIONS: Answer Question One and Any other Two Questions
QUESTION ONE
(a) Distinguish between the following terms:
(i) Primary markets and secondary markets. (2 Marks)
(ii) Money markets and capital markets. (2 Marks)
(b) (i) Explain the role of capital markets in the financial system. (4 Marks)
(ii) Justify the rationale of financial market regulations and explain the forms of financial
regulations used to regulate the markets. (8 Marks)
(c) Derivatives trading is a relatively new issue even in the most sophisticated financial markets.
Required:
(i) Explain the factors that have promoted the derivatives trading. (4 Marks)
(ii) Describe why derivative trading is absent in the emerging markets. (4 Marks)
(d) Monetary policies are interventionary measures adopted by the Government in regulating the
supply of currency with a view of stabilizing the prices and interest rates.
Required:
Explain the various types of monetary policies used by Central Bank to regulate money supply.
(6 Marks)
(Total: 30 Marks)
QUESTION TWO
(i) Define the term financial deepening. (2 Marks)
(ii) Describe the various aspects of financial deepening. (4 Marks)
(iii)Argue a case for and against cross border listing. (8 Marks)
(iv) Explain the specific indicators of capital market development. (4 Marks)
QUESTION THREE
According to Macnon show, financial systems in most of the developing economies are repressed.
Required:
(i) Define the term financial repression. (3 Marks)
(ii) Explain the various instruments used by Governments in achieving financial repression.
(iii) Describe the implication/consequences of financial repression. (6 Marks)
(iv) Highlight the role of Central Bank in the financial system. (6 Marks)
QUESTION FOUR
(a) Due to asymmetric information between the lenders and the borrows, there arises the concept
of; moral hazards, adverse selection and credit rationing
Required:
Make short notes on the following:
(i) Moral hazard. (3 Marks)
(ii) Adverse selection. (3 Marks)
(iii) Credit rationing (2 Marks)
(b) Explain the role of commercial banks. (6 Marks)
(c) Highlight any 6 examples of financial innovations that have been stipulated in the market by
various impulses. (6 Marks)
QUESTION FIVE
(a) Distinguish between futures and swaps as used in the derivative markets. (2 Marks)
(b) Explain the determinants of exchange rates in the economy. (5 Marks)
(c) Describe the floating exchange rate regime and give the benefits of the same. (6 Marks)
(d) Highlight the role of IMF in the developing economies. (7 Marks)

Cfm 309 Financial Institutions And Markets Question Paper

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