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
OF COMMERCE

BAC 305:
FINANCIAL MARKETS AND INSTITUTIONS

DATE: Thursday, 17th September, 2009

TIME: 11.00 a.m. – 1.00 p.m.
------------------------------------------------------------------------------------------------------------
INSTRUCTIONS:
• Answer ALL questions.
• Be clear and concise

Question One
a)
Distinguish between Primary and Secondary securities market
(3 marks)
b)
“Despite the large investments in the stock exchange and the various government
incentives only a few companies are listed at the stock exchanges of the three East
African countries”. This was the opening remark by the guest speaker in a
seminar whose theme was “Developing our capital market”.

Required:

In light of the above comment
i)
Explain the merits to a company for being listed on the stock exchange
(6 marks)

ii)
Highlight the main factors that may hinder companies from being listed at
the
stock
exchange
(6
marks)

Page 1 of 2

Question Two
a)
The term structure of interest rates defines the relationship between maturity and
annualized yield, holding all other factors constant. Discuss the main theories
that have been used to explain this
relationship
(15
marks)
b)
Briefly explain the relationship between the governments’ budgetary requirements
and interest rates prevailing in the financial markets

(5 marks)

Question Three
a)
The foreign currency exchange rate is fixed by the supply and demand curve just
like any other commodity in an open market. State and explain the main factors
that
affect
the
exchange
rate.
(12
marks)
b)
Highlight the main factors to consider when choosing between Euro markets and
domestic markets

(5 marks)
c)
Distinguish between a fixed exchange rate and a floating exchange rate

(3 marks)

Question Four
a) Explain
the
Main purposes for which the IMF was established as per Article One.

(5 marks)
b) Discuss
Any THREE money market instruments available to meet the diverse
needs
of
participants
(6
marks)
c)
List the main reasons as to why the NSE established the ALL Share Index besides
the
NSE
20
Share
Index
(4
marks)

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