Financial Markets And Institutions Question Paper

Financial Markets And Institutions

Course:Bachelor Of Commerce

Institution: Kenyatta University question papers

Exam Year:2010

KENYATTA UNIVERSITY
UNIVERSITY EXAMINATIONS 2008/2009
INSTITUTE OF OPEN LEARNING (IOL)
EXAMINATION FOR THE DEGREE OF BACHELOR OF COMMERCE

BAC 305: FINANCIAL MARKETS AND INSTITUTIONS

DATE: Thursday 18th February 2010

TIME:
2.00p.m – 4.00p.m

INSTRUCTIONS:
Answer all questions
Question 1
a)
What is exchange rate? Briefly explain the Fixed and Flexible exchange rate systems [8marks]
b)
Differentiate between an organized market and an over the counter market. [10marks]
c)
State two facilities that are available to countries seeking for IMF assistance. [2marks]

Question 2
a)
Differentiate between bonds & stocks. [6marks]
b)
Explain the benefits that are enjoyed by investors because of the existence of an organized securities exchange market. [10marks]
c)
Dunlop Quotes its shares at Kshs. 100/= but has a par value of Kshs. 30/=. At the end of the financial year, 18% of its profit was given as dividend. What is the yield rate? [4marks]

Question 3
a)
How can the central bank control the level of economic activity within the country? Why is it more successful in doing so in a period of inflation then in depression? [10marks]
b)
What is the contribution of the financial sector to economy? [6marks]
c)
Karanu won a lottery of 2 million Kshs to be paid in Kshs. 100,000 installments each year for 20 years. If the rate of interest is 10%, how much can he receive today? [4marks]

Question 4
a)
Outline reasons why monetary policy used Developed countries is not applicable in Less Developed Countries especially in Kenya. [6marks]
b)
Discuss four instruments that are used in the fiscal policy to stabilize the economy of the central bank. [4marks]
c)
What services does money perform in the economy? What are the various forms of money in use today? [6marks]
d)
Suppose Nelson borrowed Kshs. 100,000 to be compounded annually for 5 years at the interest rate 16%
(i)
How much interest should he pay?
ii)
What is the total amount to pay after 5 years?

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