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Dfi 303: Financial Institutions And Markets Question Paper

Dfi 303: Financial Institutions And Markets

Course:Bachelor Of Finance

Institution: University Of Nairobi question papers

Exam Year:2014

UNIVERSITY OF NAIROBI
MODULE II DEGREE PROGRAMME-2013/2014
(NAIROBI-EVENING)

THIRD YEAR EXAMINATIONS FOR THE DEGREE OF BACHELOR OF COMMERCE

DFI 303: FINANCIAL INSTITUTIONS AND MARKETS
DATE: AUGUST 8, 2014 TIME: 6.00P.M.-8.00P.M.

INSTRUCTIONS

-Attempt ALL questions.
-Marks are allocated as shown at the end of each question.
-Be neat and relevant

QUESTION 1

Bonds with identical risk, liquidity and tax characteristics may have different interest rates because the time remaining to maturity is different. Discuss any three thories of Term structure on interest rates, clearly indicating if theories meets the three threshold of a good theory of a term structure theory. (25 marks)

QUESTION 2

Moral hazard, Adverse selection and poor credit rationing all arises because of failure in financial markets

a) Explain why markets fail
b) Explain the role of information asymmetry in
i) Failure in Financial markets
ii) Moral Hazard
iii) Adverse selection
iv) Poor credit rationing
(25 marks)

QUESTION 3

a) Commercial banks are one of the most important financial institutions in Kenya. They play a number of roles in the country''s development. These roles
can be classified into either financial or non financial role. Explain the non-financial roles. (12 marks)

b) The Central Depository System(CDS) enables the transfer of securities without the need for physical movement of securities. Identify any six
stakeholders of CDS and their respective roles. (13 marks)

QUESTION FOUR

In Kenya there are too many laws rules and regulations guiding the operations of the financial markets. This has given rise to conflict in the laws in certain cases and overlap of some activities in other instances.
Discuss the financial sector regulatory system in Kenya and highlight any regulatory overlaps. (25 marks)

Dfi 303: Financial Institutions And Markets Question Paper

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