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Buss 322: Money Banking And Finance Question Paper

Buss 322: Money Banking And Finance

Course:Business Administration

Institution: Kenya Methodist University question papers

Exam Year:2010

FACULTY : BUSINESS AND MANAGEMENT STUDIES
DEPARTMENT : BUSINESS ADMINISTRATION
TIME : 2 HOURS
INSTRUCTIONS Answer Question ONE and any Other TWO Questions

Question 1
a) Highlight 3 advantages of issuing a government bond over the corporate bond (6marks)
b) Due to the current global financial crisis, the Central Bank Of Kenya Monetary Policy Committee has invoked certain actions of containing the downturn-that has adversely affected consumer spending and foreign direct investment.
Discuss briefly which is the best instrument of monetary policy, that it would institute for:
i) A customer getting approval on a Ksh. 10M loan from Barclays
ii) Interest rate on a loan from Equity bank
iii) Purchasing Power
iv) Increasing available money for lending by co-op bank
v) Subscription for the 91 day Treasury Bill, at 7.6% (20marks)
c) iii) How does Gresham`s Law help explain the evolution of money? (4marks)

Question 2
a) Highlight three differences between a Primary Market and a Secondary Market (6marks)
b) Highlight the demerits of branch banking (8marks)
c) Discuss three characteristics of money (6marks)

Question 3
a) Briefly discuss what effect a recession in the economy would have on the following:
i) Equities
ii) Commercial paper
iii) Demand for Foreign Currency
iv) Branch Banking
vi) Interest rates (20marks)

Question 4
a) With reference to credit creation:
i) Highlight 3 assumptions in the credit creation process (6marks)
ii) 4 limitation to the power of credit creation (4marks)
b) If there was an initial deposit made to Equity Bank for Ksh 500,000, to what extent can credit be created with a cash ratio of:
i) 15%?
ii) 14% (4marks)
c) Discuss three advantages of using electronic payments over the use of paper currency (6marks)

Buss 322: Money Banking And Finance Question Paper

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