Financial Institutions And Markets Question Paper

Financial Institutions And Markets

Course:Certified Securities And Investment Analyst

Exam Year:2011

FINANCIAL INSTITUTIONS AND MARKETS
Time allowed:3 hours
ALL questions carry equal marks
FRIDAY: 27 MAY 2011
Answer any five questions
QUESTION ONE
a) Distinguish between the following sets of terms:
i. Financial intermediation and maturity intermediation. (4 marks)
ii. Information intermediation and risk intermediation. (4 marks)

b) Explain the following theories in support of regulation in financial markets:
i. Public interest theory. (3 marks)
ii. Many interest theory. (3 marks)
iii. Special interest theory. (3 marks)
iv. Public choice theory. (3 marks)
QUESTION TWO
a) Discuss the factors that have contributed to limited access to financial market services in developing countries. (10 marks)
b) Outline six benefits that would accrue to a country upon financial inclusion. (6 marks)
c) Describe two strategies that a financial institution could employ when pricing new financial products. (4 marks)
QUESTION THREE
a) Explain five reasons why anomalies might persist in an efficient market. (10 marks)
b) In relation to micro finance, briefly explain the following terms:
i) Commercialisation. (2 marks)
ii) Transformation. (2 marks)
c) Highlight six benefits that would accrue to a micro finance institution upon transformation. (6 marks)
QUESTION FOUR
a) Summarise three factors to consider when constructing market indexes. (6 marks)
b) Briefly explain seven investment strategies which could be adopted by institutional investors with regard to stock index futures. (14 marks)
QUESTION FIVE
i. Distinguish between global debt problem and financial contagion. (4 marks)
ii. Analyse the factors that might lead to the existence of a global debt problem. (6 marks)
iii. Suggest possible solution to the global debt problem. (4 marks)
b) Highlight four reasons why a firm would prefer to raise capital outside its local market. (4 marks)
QUESTION SIX
i. Define the term “financial liberalisation”. (2 marks)
ii. Argue the case for financial liberalisation in an economy. (5 marks)
iii. Outline five challenges of financial liberalisation. (5 marks)
c) Summarise four theories advanced to explain financial crisis. (8 marks)
QUESTION SEVEN
i. Define the term “book building” in relation to professional ethics. (2 marks)
ii. Discuss four fundamental principles ethics for a securities and investment analyst. (8 marks)
d) In relation to future market, explain the following terms:
i. Maintenance margin. (2 marks)
ii. Margin call. (2 marks)
iii. Scalper. (2 marks)
iv. Day trader. (2 marks)
v. Swing trader. (2 marks)

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