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Cfm 305-F Treasury Management Question Paper

Cfm 305-F Treasury Management

Course:Bachelor Of Commerce

Institution: Kca University question papers

Exam Year:2009

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UNIVERSITY EXAMINATIONS: 2009/2010
THIRD YEAR STAGE 2 EXAMINATION FOR THE DEGREE OF
BACHELOR OF COMMERCE
CFM 305-F TREASURY MANAGEMENT (SATURDAY EXAM)
DATE: DECEMBER 2009 TIME: 2 HOURS
INSTRUCTIONS: Answer ONE and Any other TWO Questions
QUESTION ONE
At the end of a financial year, your bank contracted the services of a consultant economist to provide
an economic assessment of the coming year. The economist, in his report said in part that:
“_________ during the coming year, the economy is expected to slow down. Most indicators show a
slow in economic activity. The index of manufacturing production is expected to fall from about 8% to
slightly less than 1.5% p.a. In the next twelve months, unemployment will increase and incomes will
fall. Industry analysts feel that the extent to which the country will experience a recession will depend
on the monetary policies adopted. Increased government spending could lead to increased inflation and
depress the economy further.”
a) Explain five reasons why the management of the bank should not rely entirely on the report
based on forecasted economic indicators in formulating the bank policy. (10 Marks)
b) If the trend depicted in the report persists, explain six effects it could have on the banking
industry. (10 Marks)
c) Explain five monetary policy measures the government could take to reverse the trend.
(10 Marks)
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QUESTION TWO
a) In relation to exchange rate regimes, explain with examples the advantages and
disadvantages of the following:
i) A clean floating exchange rate (5 Marks)
ii) Fixed exchange rate. (5 Marks)
b) Explain FIVE ways in which a government can finance a budget deficit. (10 Marks)
QUESTION THREE
a) Explain FIVE factors that discourage short term capital movement into a company.
(10 Marks)
Explain FIVE types of assets that appear on the balance sheet of a commercial bank.
(10 Marks)
QUESTION FOUR
One of the ways in which the Government can stimulate growth and development in the country is
to use taxation in encouraging foreign investors to invest in the country.
a) Explain FIVE types of tax incentives that the Government can use to attract foreign
investors. (10 Marks)
b) Explain FIVE features of the foreign exchange Market. (10 Marks)
QUESTION FIVE
Analyze the effects of an increase in interest rates on each of the following:
a) Personal sector; (5 Marks)
b) Corporate sector; (5 Marks)
c) Commercial banks; (5 Marks)
d) Money Supply. ( 5 Marks)

Cfm 305-F Treasury Management Question Paper

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