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Financial Institutions And Markets Question Paper

Financial Institutions And Markets

Course:Bachelor Of Commerce

Institution: University Of Nairobi question papers

Exam Year:2013

UNIVERSITY OF NAIROBI
MODULE II DEGREE PROGRAMME – 2012/2013 (NAIROBI DAY)
THIRD YEAR EXAMINATIONS FOR THE DEGREE OF BACHELOR OF COMMERCE
DFI 303: FINACIAL INSTITUTIONS AND MARKETS

DATE: MAY 8, 2013 TIME: 9:00 A.M. – 11:00 A.M.

INSTRUCTIONS:
1. Attempt ALL Questions
2. Use legible handwriting
3. Do not write on the Question Paper
4. Questions carry EQUAL marks

Question One
1) What is a foreign exchange market and why do investors invest in foreign markets? (10 marks)

2) “The Kenyan currency has been unstable for the last few years.” Discuss the exchange rate determinants. (10 marks)

3) Write short notes on the following:
a) Pegged exchange rate system (3 marks)
b) Managed float exchange system (2 marks)

Question Two
1) Describe the role of a financial system with specific reference to the Kenyan financial market. (9 marks)

2) Describe the unbiased expectation theory, liquidity preference theory and the segmented markets theory. (12 marks)

3) What are the assumptions of the unbiased expectations theory? (4 marks)

Question Three
1) What is mortgage refinancing and mortgage amortization? (9 marks)

2) Calculate the yield to maturity on the following bonds:
a) A 9% coupon (paid semi-annually) bond, with a Sh. 1,000 face value and 15 years remaining to maturity. The bond is selling at Sh. 985. (5 marks)
b) An 8% coupon (paid quarterly) bond, with a Sh. 1,000 face value and 10 years remaining to maturity. The bond is selling at Sh. 915 (5 marks)

3) Describe which situation a bond is considered a premium bond, a discount bound and a par bond. (6 marks)

Question Four
1) What are the functions of commercial banks in Kenya? (12 marks)

2) What is investment banking and how is it different from commercial banking? (13 marks)

Financial Institutions And Markets Question Paper

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