Tribhuvan University
Bachelor of Business Administration
Semester 6 · Model question
Course Title: Financial Markets Services (FIN208)
Full Marks: 100Pass Marks: 50Time: 3 Hrs
Candidates are required to give their answers in their own words as for as practicable.
Group A
Brief Answer Questions(10 × 2 = 20)
- 1.2
List the four different kinds of financial assets.
- 2.2
What are the four common characteristics of financial services.
- 3.2
For example, a bank enters into a reverse repurchase agreement in which it agrees to buy central bank funds from one of its corresponding banks at a price of Rs 100,000 and promises to sell these funds back at a price of Rs 100,125 after five days. Find the yield on this repo to the bank.
- 4.2
You are considering an investment in a municipal bond that is paying 6.25 percent annually. If your marginal tax rate (T) is 21 percent, find the tax-equivalent rate of interest on this bond.
- 5.2
State the key features of microfinance in Nepal.
- 6.2
Differentiate the funded pension funds with non-funded pension funds.
- 7.2
Assume you own 20,000 shares of common stock of a company with 2 million total shares outstanding. The company announces a plan to sell additional shares through a right offering, how many of the new shares can you purchase if you exercise your preemptive rights?
- 8.2
An investor purchases a mutual fund share for Rs 100. The fund pays dividends of Rs 2, distributes a capital gain of Rs 3, and charges a fee of Rs 1.5 when the fund is sold one year later for Rs 106. What is the one-year rate of return on this investment?
- 9.2
Define the credit rating agencies.
Answer comingAlso asked in 2025
- 10.2
What does the AT I in bank capital regulation stand for?
Group B
Short Answer Questions: (Attempt any SIX Questions)(6 × 5 = 30)
- 11.5
Discuss the key components of financial system of Nepal.
- 12.5
Explain the reasons behind the financial market regulation.
- 13.5
Describe the essential feature of insurance.
- 14.5
What is mutual fund? Why it is thought important to the investors of the country like Nepal? Explain.
- 15.5
An insurance company collected 7.25 million in premiums and disbursed 2.11 million in losses. Loss adjustment expenses amounted to 5.6 percent and dividends paid to policyholders totaled 2.5 percent. The total income generated from their investments was Rs 200,000 after all expenses were paid. a. What is the combined ratio? b. What is the operating ratio? c. What is the net profitability in percent?
- 16.5
For example, 28-days maturity Treasury bills has purchase price of Rs 99.51. The face value of this bill is Rs 100. a. Calculate Treasury bill's bank discount rate. b. Calculate coupon equivalent yield. c. Find the effective annual rate.
Answer comingAlso asked in 2025
- 17.5
A taxable company sponsors a typical pension plan into which the employee deposit 12 percent of employees Rs 60,000 annual income. The company matches 50 percent of the first 5 percent of employee's earnings. Employee expects the fund to yield 10 percent next year. If employee is currently in the 31 percent tax bracket, what is the annual investment in this pension plan? Also find the one-year return.
Group C
Long Answer Questions: (Attempt any THREE Questions)(3 × 10 = 30)
- 18.10
In order to mobilize the long-term funds from savers to ultimate users, the capital market performs important functions. In essence, companies seeking the long-term funds issue the popular instruments, particularly; bonds, preferred stock, and common stock. Each of these instruments, however, has its own distinct characteristics. Explain using appropriate examples.
- 19.10
You plan to purchase a house costing Rs 125,00,000 using a 30-year mortgage obtained from your local bank. a. What is a required down payment for a home buyer? b. Calculate your monthly payments on this mortgage. c. Separate the amount of interest and principal paid in the 25th installment payment.
- 20.10
Use the following information about the bank capital of a typical commercial bank and answer the required below. Figures are in million. Equity share capital (paid up) 2,000 Share premium 1,400 Undivided or retained earnings 600 Subordinated term debt 450 General loan loss provision 750 Assets revaluation reserve 70 Statutory general reserves 900 Capital redemption reserve 525 Exchange equalization reserve 75 Investment adjustment reserve 71 Capital adjustment reserve 22 Intangible assets 40 Investment in equity of institutions with financial interest 85 a. Compute the common equity tier I capital. b. Compute the total capital of the bank. c. Does this bank hold adequate enough capital, if the risk weighted exposure of this commercial bank is Rs 70,250 million? Why?
- 21.10
The Himal Company has issued 6,000,000 new shares. Its investment bank agrees to underwrite these shares on a best-efforts basis. The investment bank is able to sell 5,200,000 shares for Rs 54 per share. a. It charges the issuer Rs 1.25 per share sold. How much money does Himal receive? b. What is the investment bank's profit? c. On a best-effort basis as in given above, who bears the risk? Why?
Group D
- 22.
Nepal Rastra Bank is responsible for fine-tuning the money supply in the banking system. The most commonly used monetary tools used by central banks around the world to manage money supply condition are open market operations, discount window loans, and required reserve ratios. The required reserve ratio is particularly the ratio of the deposits held by commercial banks which must be placed at the account maintained at the central bank, and the bank cannot lend it out. Increased required reserve ratio usually mean the less amount is available for credit which ultimately lowers the total amount of money in entire banking system and vice versa. To see an effect of change in required reserve ratio to banking deposits, for example, assume a typical commercial bank that reports existing transaction deposit of Rs 500 billion on its balance sheet. The current required reserve ratio set by centra bank is 8 percent. If the new required reserve ratio is set 7 percent, answer the required that follows below. a. Mention the major issues discussed in this given text. b. Show the initial balance sheet of the central bank and the commercial bank in a simplified version. c. Calculate the change in transaction deposit and new level of deposits if this commercial bank converts 80 percent of its excess reserves to loans and borrowers return 70 percent of these funds to the commercial bank as transaction deposits. d. Show the balance sheet of the central bank and the commercial bank for the given case (c), assume there is only one commercial bank in the banking system. e. Why do you think the negative relationship exist between the change in required reserve ratio and deposit expansion/contraction in the banking system?
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