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Management Of Financial Institutions Question Paper

Management Of Financial Institutions

Course:Bachelor Of Commerce

Institution: University Of Nairobi question papers

Exam Year:2013

UNIVERSITY OF NAIROBI
MODULE II DEGREE PROGRAMME 2012/2013
THIRD YEAR EXAMINATIONS FOR THE DEGREE OF BACHELOR OF COMMERCE
DFI 302: MANAGEMENT OF FINANCIAL INSTITUTIONS

DATE: MAY 3, 2013 TIME: 11:30 A.M. – 1:30 P.M.

INSTRUCTIONS: ATTEMPT ALL QUESTIONS

QUESTION ONE
a) Real assets are more important in the earnings of the financial institution. Financial assets, because of their intangible nature contribute insignificantly to the incomes of most financial institutions.

Explain the above statements giving examples. (5 marks)

b) With examples from Kenya explain the main functions of financial intermediaries.
(5 marks)

c) With examples explain the main areas of continued concern in financial regulations.
(3 marks)

d) Using appropriate examples, explain the main types of security firms in Kenya.
(8 marks)

e) Explain the main regulations for the securities firms business in Kenya. (4 marks)

QUESTION TWO
a) Explain the importance of interest rates to financial managers. (3 marks)

b) Explain the main factors that may lead to the increase in supply of loanable funds. (4 marks)

c) What is the effect of increase in demand for loanable funds on the equilibrium rate of interest holding all other factors constant? Explain using diagrams. (8 marks)

d) The ‘Fishers Effect’ is a popular theory in economics. Managers in financial markets find the aspects and principles in the Fisher’s Theorem important in decisions that influence their day to day activities. Using appropriate examples, explain the effect of inflation on the market rate of interest. (4 marks)

e) Juma walks in one of the Multinational Financial Institutions and laments. There are so many theories of interest rates, yet this institution does not appear to apply any in determining its interest rates.

With the exception of the loanable funds theory explain the other theories of interest rate determination clearly explaining their effects on the market rate of interest. (6 marks)

QUESTION THREE
a) Explain the price yield relationship equation. (2 marks)

b) Explain the parameters for explaining the yield of a bond. (4 marks)

c) Explain the duration of a common stock clearly stating the main parameters for determining this duration. (5 marks)

d) Explain the nature of data accumulated by the main non-depository financial institutions. (5 marks)

e) Distinguish closed-end from open-end investment companies giving examples as appropriate. (9 marks)

QUESTION FOUR
a) Explain the main performance measures of the financial institution. (12 marks)

b) Explain the nature of data accumulated by Retirement Benefits institutions. (6 marks)

c) How do Retirement Benefits institutions measure their performance? Explain using examples. (5 marks)

d) Explain the taxability concept in evaluating the activities of Real Estate Investment Trusts (REITS). (2 marks)

Management Of Financial Institutions Question Paper

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