Money And Banking Question Paper
Money And Banking
Course:Bachelor Of Commerce (Commerce)
Institution: Kabarak University question papers
Exam Year:2010
KABARAK
UNIVERSITY
UNIVERSITYEXAMINATION
2009/2010 ACADEMIC YEAR
FOR THE DEGREE OF BACHELOR OF
COMMERCE
COURSE CODE: FNCE 313
COURSE TITLE:
MONEY AND BANKING
STREAM:
Y3S1
DAY:
WEDNESDAY
TIME:
4:00 – 6:00 P.M.
DATE:
07/04/2010
INSTRUCTIONS:
1. Answer questions ONE and any other TWO questions
2. Write your registration number clearly, show workings where needed, be neat, brief and to the
point
PLEASE TURNOVER
Page 1 of 3
QUESTION 1
(Total marks 30)
i. Discuss the Social Evolution of Money.
(10 marks)
ii. Discuss 5 tools of monetary policy used in Kenyan financial system.
(10 marks)
iv. Describe 5 functions of commercial banks.
(5 marks)
v. Describe the phrase money multiplier.
(5 marks)
QUESTION 2
(Total marks 20)
i. In 1988 the capital requirements established by the Bank for International Settlements (BIS) in
Basel, and later
adopted by the 10 member states set the minimum capital as specified as a percentage of the risk-
weighted assets of the bank as shown in the table below:
Asset
Risk Weight
Cash and equivalents
0
Government securities
0
Inter-bank loans
0.2
Mortgage loans
0.5
Ordinary loans
1.0
Standby letters of credit
1.0
The BIS rules set requirements on two categories of capital, Tier 1 capital and Total capital:
Tier 1 capital is the book value of its shares plus retained earnings.
Tier 2 capital is loan-loss reserves plus subordinated debt. **
Total capital is the sum of Tier 1 and Tier 2 capital.
Tier 1 capital must be at least 4% of total risk-weighted assets.
Total capital must be at least 8% of total risk-weighted assets.
**Subordinated debt is long term debt that, in case of insolvency, is paid off only after depositors and
other creditors have been paid. Thus it can be used like equity to provide those creditors some protection
against insolvency.
Given are the Set Kotes Bank categories of Assets:
Asset
Amount in million Kenya shillings
Cash and equivalents
40
Government securities
80
Inter-bank loans
100
Mortgage loans
200
Ordinary loans
300
Standby letters of credit
80
Required:
Estimate:
The total risk-weighted assets and advise the bank management on the size of T 1 capital and the least
size of total capital for the bank.
(10 marks)
ii. Discuss 5 functions of a central bank that operates in a free market economy like the Kenyan.
(10 marks)
Page 2 of 3
QUESTION 3
(Total marks 20)
i. Describe the following classes of metallic money:
a) Standard money
(2 marks)
b) Token money
(2 marks)
c) Subsidiary money
(2 marks)
ii. Discuss the 6 phases on the development of the Kenyan Central Bank System.
(14 marks)
QUESTION 4
(Total marks 20)
Give a critical survey on the Kenyan Commercial Banking Sector since 1896 to date.
(20 marks)
QUESTION5
(Total marks 20)
i. Discuss the monetary policy operations in respect to management of the money supply.
(10 marks)
ii. Discuss 4 areas in which the World Bank uses to raise funds:
(10 marks)
Page 3 of 3
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