FINANCIAL MARKETS AND SPECIALISED INSTITUTIONS AUGUST 2022 PAST PAPER

WEDNESDAY: 3 August 2022. Afternoon paper. Time Allowed: 3 hours.

Answer ALL questions. Marks allocated to each question are shown at the end of the question. Do NOT write anything on this paper.

QUESTION ONE

1.  Discuss three attributes of a well constructed security market index. (6 marks)

2. Summarise eight benefits of Credit Reference Bureaus (CRBs) to an economy. (8 marks)

3. Differentiate between:

Electronic communication networks and electronic crossing networks as used in financial markets and institutions. (2 marks)

Eurobond and junk bond. (2 marks)

Sell-side analyst and buy side analyst. (2 marks)

(Total: 20 marks)

QUESTION TWO

1. Explain four functions of The Asset Recovery Agency or a similar body in your country in the fight against financial crime. (4 marks)

2. In relation to underwriting of new securities, explain the importance of the following:

Originating house. (2 marks)

Prospectus. (2 marks)

Syndicate. (2 marks)

3. Discuss five methods that could be used to determine the price of an initial public offering (IPO). (10 marks)

(Total: 20 marks)

QUESTION THREE

1. The liquidity of a market can be judged in terms of its depth, breadth and resilience.

In relation to the above statement, explain the following terms:

Depth. (2 mark)

Breadth. (2 mark)

Resilience. (2 mark)

2. Briefly explain four functions of Insurance Regulatory Authority (IRA) or a similar body in your country. (4 marks)

3. Discuss two types of financial regulation and supervision. (4 marks)

4. Identify six alternative investments available to investors in financial markets. (6 marks)

(Total: 20 marks)

QUESTION FOUR

1.  Discuss four factors that could contribute to the changing structure of securities market (4 marks)

2. Explain six duties of the Financial Reporting Centre (FRC) or equivalent body in your country. (6 marks)

3. Summarise four factors that could motivate a non-listed company to go public through an initial public offering
(IPO). (4 marks)

4. With reference to financial institutions, discuss three consequences of failure to comply with the applicable sectoral regulations. (6 marks)

(Total: 20 marks)

QUESTION FIVE

1.  With reference to financial crises, distinguish between “bank runs” and “bank panics”. (4 marks)

Identify two private sector solutions and two government sector solutions that could be adopted to prevent bank panics. (4 marks)

2. Hazina Commercial Bank Ltd. is among the top twenty performing banks in your country. In the recent past, the
board of directors of Hazina Commercial Bank Ltd. has passed a resolution to open ten new branches in ten
different countries across the globe.

In reference to the above resolution by the board, analyse six advantages of globalising the operations of Hazina
Commercial Bank Ltd. (6 marks)

3. Your country is experiencing unstable inflation rate and the economic policy makers are concerned that the currency does not reflect the existing economic fundamentals.

With reference to the above statement, examine three courses of action that the Central Bank could take in order to address the situation. (6 marks)

(Total: 20 marks)

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