 |
MAB611S-MONEY AND BANKING-2ND OPP-JULY 2022 |
|
|
1 Page 1 |
▲back to top |
nAmlBIA UnlVERSITY
OF SCIEnCE Ano TECHnOLOGY
FACULTYOF MANAGEMENT SCIENCES
DEPARTMENT OF ACCOUNTING, ECONOMICS AND FINANCE
QUALIFICATION: BACHELOR OF ECONOMICS
QUALIFICATION CODE: O7BEC0
LEVEL: 7
COURSE CODE: MAB611S
COURSE NAME: MONEY AND BANKING
SESSION: JULY2022
DURATION: 3 HOURS
PAPER: THEORY
MARKS: 100
SECONDOPPORTUNITYEXAMINATION QUESTION PAPER
EXAMINER(S) Mr Eslon Ngeendepi
Mr Makaisapi Tjiumbirua
MODERATOR: Mr Eden Shipanga
INSTRUCTIONS
1. Answer ALL the questions.
2. Write clearly and neatly.
3. Number the answers clearly.
PERMISSIBLEMATERIALS
1. Pens/pencils/ erasers
2. Calculator
3. Ruler
THIS QUESTION PAPER CONSISTS OF 6 PAGES {Including this front page)
|
|
2 Page 2 |
▲back to top |
QUESTION 1
[25 Marks]
Select the letter that best represents your choice.
1. Currency includes
a) Paper money and coins.
b) Paper money, coins, and checks.
c) Paper money and checks.
d) Paper money, coins, checks, and savings deposits.
2. Poorly performing financial markets can be the cause of
a) Wealth.
b) Poverty.
c) Financial stability.
d) Financial expansion.
3. High interest rates might ____
purchasing a house or car but at the same time
high interest rates might ____
saving.
a) Discourage; encourage
b) Discourage; discourage
c) Encourage; encourage
d) Encourage; discourage
4. Stock prices are
a) Relatively stable trending upward at a steady pace.
b) Relatively stable trending downward at a moderate rate.
c) Extremely volatile.
d) Unstable trending downward at a moderate rate.
5. Financial institutions search for ____
has resulted in many financial
innovations.
a) Higher profits
b) Regulations
c) Respect
d) Higher risk
6. Which of the following is NOT a financial institution?
a) A life insurance company
b) A pension fund
c) A credit union
d) A business college
7. The delivery of financial services electronically is called
a) E-business.
b) E-commerce.
c) E-finance.
d) E-possible.
2
|
|
3 Page 3 |
▲back to top |
8. Money is defined as
a) Bills of exchange.
b) Anything that is generally accepted in payment for goods or services or in the
repayment of debt.
c) A risk-free repository of spending power.
d) The unrecognized liability of governments.
9. Which of the following statements about the characteristics of debt and equities is
TRUE?
a) They can both be long-term financial instruments.
b) Bond holders are residual claimants.
c) The income from bonds is typically more variable than that from equities.
d) Bonds pay dividends.
10. Long-term debt has a maturity that is
a) Between one and ten years.
b) Lessthan a year.
c) Between five and ten years.
d) Ten years or longer.
11. When I purchase ___
_, I own a portion of a firm and have the right to vote on
issuesimportant to the firm and to elect its directors.
a) Bonds
b) Bills
c) Notes
d) Stock
12. ____
work in the secondary markets matching buyers with sellers of securities.
a) Dealers
b) Underwriters
c) Brokers
d) Claimants
13. An important function of secondary markets is to
a) Make it easier to sell financial instruments to raise funds.
b) Raisefunds for corporations through the sale of securities.
c) Make it easier for governments to raise taxes.
d) Create a market for newly constructed houses.
14. Secondary markets make financial instruments more
a) Solid.
b) Vapid.
c) Liquid.
d) Risky.
3
|
|
4 Page 4 |
▲back to top |
15. A financial market in which only short-term debt instruments are traded is called the
----
a) Bond
market.
b) Money
c) Capital
d) Stock
16. Equity and debt instruments with maturities greater than one year are called
----
market instruments.
a) Capital
b) Money
c) Federal
d) Benchmark
17. If bad credit risks are the ones who most actively seek loans and, therefore, receive
them from financial intermediaries, then financial intermediaries face the problem
of
a) Moral hazard.
b) Adverse selection.
c) Free-riding.
d) Costly state verification.
18. An example of the problem of ____
is when a corporation uses the funds raised
from selling bonds to fund corporate expansion to pay for Caribbean cruises for all
of its employees and their families.
a) Adverse selection
b) Moral hazard
c) Risk sharing
d) Credit risk
19. Financial intermediaries have developed expertise in monitoring the parties they
lend to, thus reducing losses due to
a) Moral hazard.
b) Adverse selection.
c) Free-riding.
d) Economies of scope.
20. What is the present value of $500.00 to be paid in two years if the interest rate is 5
percent?
a) $453.51
b) $500.00
c) $476.25
d) $550.00
4
|
|
5 Page 5 |
▲back to top |
21. To claim that a lottery winner who is to receive $1 million per year for twenty years
has won $20 million ignores the process of
a} Face value.
b} Par value.
c} Deflation.
d} Discounting the future.
22. If a $5,000 coupon bond has a coupon rate of 13 percent, then the coupon payment
every year is
a} $650.
b} $1,300.
c} $130.
d} $13.
23. A $1,000 face value coupon bond with a $60 coupon payment every year has a
coupon rate of
a} 0.6 percent.
b} 5 percent.
c} 6 percent.
d} 10 percent.
24. If the amount payable in two years is $2,420 for a simple loan at 10 percent interest,
the loan amount is
a} $1,000.
b} $1,210.
c} $2,000.
d} $2,200.
25. The present value of a fixed-payment loan is calculated as the ____
of the
present value of all cash flow payments.
a} Sum
b} Difference
c} Multiple
d} Log
5
|
|
6 Page 6 |
▲back to top |
QUESTION 2
[25 Marks]
1. Name and discuss the four main sources of funds for banks?
{10}
2. What are the benefits and costs for a bank when it decides to increase its bank capital.
{5}
3. Assume a required reserve ratio of 0.10 to answer the questions that follow.
Assets in Millions N$
Reserves
150
Loans
250
Bonds
125
Total
525
Liabilities & Net Worth (in
millions N$}
Deposits
500
Bank
25
Capital
Total
525
a} Calculate the initial required reserves for this bank.
{3}
b} Calculate the initial excess reserves for this bank.
{3}
c} Convert all of the excess reserves into loans. Construct the new balance sheet. (4)
QUESTION 3
[25 Marks]
1. Money market is described to be a liquid market as compared to Capital Market.
Briefly explain the 4 money market instruments you learned.
{8}
2. Do bondholders fare better when the yield to maturity increases or when it
decreases? Why?
(7)
3. How can financial innovation lead to financial crises?
(10}
QUESTION 4
[25 Marks]
1. List the three motives for holding money according to the Keynesian liquidity
preference theory.
{3}
2. Discuss fully the principles of bank management. Use practical examples and also
discuss the possible problems and/or costs that a bank may experience if it violates
any of these principles.
{22}
TOTAL= 100 MARKS
6