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Banking and Finance

By | April 2013
Page 1 of 4
PRINCIPLES OF BANKING AND FINANCE
MT.KENYA UNIVERSITY
INSTRUCTIONS
Answer at least TWO questions from section A and TWO others from section B SECTION A
1.a. Compare and contrast the main features of the financial systems of US and Germany. 15 marks b. Discuss the reasons for the internet bubbles of the late 1990s 10 marks 2.a. Explain the adverse selection problem in financial markets and also discuss the solutions to this problem 12 marks b. Define financial intermediaries and explain the major functions of Commercial Banks of Kenya. 13 marks 3.a. For the last few years, the Central Bank of Kenya has been on the spot about the way it controls risk. Name FOUR types of Bank risks and discuss. 13 marks b. Discuss the following in relation to a bond value.

i.Interest rate risk
ii.Reinvestment risk
iii.Credit risk
iv.Inflation risk
v.Liquidity
vi.Exchange rate risk
vii.Call risk
12 marks

4.a. Define the term structure of interest rates. Briefly explain the theories of the term structure....

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