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Cfm 306: Financial Risk Management Question Paper

Cfm 306: Financial Risk Management

Course:Bachelor Of Commerce

Institution: Kca University question papers

Exam Year:2009

1
UNIVERSITY EXAMINATIONS: 2008/2009
THIRD YEAR STAGE II EXAMINATION FOR THE DEGREE OF
BACHELOR OF COMMERCE
CFM 306: FINANCIAL RISK MANAGEMENT
DATE: APRIL 2009 TIME: 2 HOURS
INSTRUCTIONS: Answer question ONE and any other TWO questions
QUESTION ONE
Would you characterize the following as:
i) Political risk
ii) Regulatory risk
iii) Economic risk
iv) Interest rate risk
v) Exchange rate risk
vi) Credit risk
a) The Government exports credits department is willing to guarantee the credit repayments due
from China, in sterling at today’s rate. (10 Marks)
b) You are awarded the contract on condition that you must provide fixed-interest credit over a
period of 10 years, in renminbi. (10 Marks)
c) Describe basis risk. (10 Marks)
2
QUESTION TWO
a) Hedging is protecting oneself from loss and to lock in profits. Explain. (10 Marks)
b) In order to hedge the rate payable on a future borrowing you should sell futures: Explain.
(10 Marks)
QUESTION THREE
Describe in detail the way in which the Central Bank of Kenya currently seek to influence interest
rates in the money Market. (20 Marks)
QUESTION FOUR
What was the Bretton wood system, and why was it introduced. (20 Marks)
QUESTION FIVE
Some conditions might generally be expected to exert downward pressure on a country’s exchange
rate over the long-term. Discuss. (20 Marks)

Cfm 306: Financial Risk Management Question Paper

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