ACC1103     FINANCIAL MARKETS & INSTITUTIONS

Course code:  ACC1103     FINANCIAL MARKETS & INSTITUTIONS

FINAL ASSESSMENT -Individual Assignment

Due date: 7^th June 2020

Turnitin submission required

Answer any 2 questions:                                               

Q1. With regard to money markets and bond markets;

1. As money market instruments, explain commercial paper and negotiable certificates of deposit.                                                                                                                   (10 marks)
2. Discuss the importance of bond ratings and explain the difference between an investment-grade bond and a junk bond.                                     (10 marks)
3. Examine why a STRIP security is created and evaluate its attractiveness to investors. Compare the same with a TIPS bond.                                                                                               (10 marks)

Q2. With regard to foreign exchange markets and derivative securities market;

1. Explain with an example the two primary methods of hedging foreign exchange risk for a financial institution. Which one is preferred by financial institutions and why?                         (10 marks)

1. Examine the importance of swap contracts and use an example to explain the difference between an interest rate swap and a currency swap.          (10 marks)

1. Examine how caps, floors and collars are used by financial institutions and why they would take any of these derivative security positions.                                                                                 (10 marks)

Q3. With regard to overview of financial institutions and stock markets;

1. Explain 5 unique economic functions performed by financial institutions to the suppliers of funds and the economy as a whole.          (10 marks)
2. Examine the role of different types of traders in the NYSE and the importance of circuit breakers in the context of stock market trading.          (10 marks)
3. Examine the role of ADRs and GDRs for investing in international stocks.          (10 marks)

Q4. With regard to commercial banks and their regulation;

1. Discuss the importance of the OCC, the FDIC and the Federal Reserve as regulators of commercial banks in the U.S.  (10 marks)

1. Discuss the main off-balance sheet activities of commercial banks and their importance. Also explain the main performance indicators of banks in the U.S.                 (10 marks)

1. What is the Basel capital accord and what are the main features of the Basel III capital requirements?                                                                               (10 marks)

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