MAASAI MARA UNIVERSITY
REGULAR UNIVERSITY EXAMINATIONS
2016/2017 ACADEMIC YEAR
FOURTH YEAR SECOND SEMESTER
SCHOOL OF BUSINESS & ECONOMICS
BACHELOR OF SCIENCE IN AGRICULTURAL ECONOMICS & RESOURCE ECONOMICS
COURSE CODE: ARE 423
COURSE TITLE: INTERNATIONAL FINANCIAL SYSTEMS
DATE: 17TH MAY 2017 TIME: 11.00AM – 1.00PM
INSTRUCTIONS TO CANDIDATES
Answer Question ONE and any other THREE questions
This paper consists of 2 printed pages. Please turn over.
QUESTION ONE
a) Write short notes on the following;
i. Spot exchange rate vs forward rate (2mks)
ii. Soft vs hard currency (2mks)
iii. Arbitrage (2mks)
iv. Capital account (2mks)
v. Euro-Bond Market (3mks)
b) On 31/3/2016 the US$ is quoted against the KES at, KES 102/$ and the South African Rand is quoted at KES 8/ZAR. A 120 day forward rate for the USD is quoted as KES 98/$, while a 150 day forward rate for the ZAR is quoted at KES5.50/ZAR. Calculate the Forward Premium for the Exchange. (6mks)
c) Explain the principal functions of the IBRD as set forth in Article 1 of the agreement. (4mks)
d) Discuss the convergence criteria for the European Monetary Union. (4mks)
QUESTION TWO
a) Discuss the IMF’s exchange rate regime classifications. (8mks)
b) Discuss the causes of Balance of Payments Disequilibrium in an economy. (7mks)
QUESTION THREE
a) ‘There are different types of finance available in euro currency market’. Explain. (9 mks)
b) Discuss the advantages of fixed exchange rates over flexible exchange rates to a country. (6mks)
QUESTION FOUR
a) Explain the roles of the IMF as spelled in the Articles of Agreement. (6 mks)
b) What are the recent changes in global financial markets? (9mks)
QUESTION FIVE
a) Discuss the historical development of the International Financial Systems. (10 mks)
b) ‘The fast growth of the Eurodollar market during 1965-1980 periods may be attributed to four major factors’ Discuss. (5 mks)
