Brief Answer Questions:
[10 × 2 = 20]What is financial system?
Define financial intermediary with an example.
State the meaning of the central bank with reference to Nepal Rastra Bank.
Define the capital market and give example of capital market instruments.
What do you mean by a euro-bond?
How does health insurance differ from life insurance?
Write notes about Citizen Investment Trust (CIT).
You can buy commercial paper of a major public corporation for Rs 380,000. The paper has a face value of Rs 400,000 and is 180 days from maturity. Calculate the bond equivalent yield on the commercial paper.
A Rs 1,000 bond is selling for Rs 900 and paying an interest payment of Rs 100 per year. Calculate the current yield.
Suppose an employee of Government of Nepal was employed on Kartik 2, 2056 B.S. and decided to retire on Kartik 2, 2081 B.S. His/her last salary was 35,500 per month at the time of retirement. How much monthly pension will he/she receive up on retirement?
Short Answer Questions: (Attempt any SIX Questions)
[6 × 5 = 30]Explain the concept and functions of financial markets.
What do you mean by monetary policy? Describe the objectives of the monetary policy.
Write a short account about the CDS and Clearing Limited with its four functions.
Describe the major money market instruments available in Nepal.
Differentiate between open-end fund and closed end fund.
Suppose Fewa Life Insurance Company, a hypothetical insurance company has a policy amount of Rs 600,000 for each policy holder. The one year survival probability for each policyholder is 99 percent i.e. (p = 0.99), and there are 1,000 policies (n = 1,000). Thus the life insurance company has 1,000 independent and identical policies, each with a 1 percent probability of paying Rs 600,000. For simplicity assume that the insurance company has no other income or expenses. If each policy pays a premium of Rs 9,000. You are required to compute:
a. Expected net revenue per policy.
b. Total expected net revenue.
c. Standard deviation for single life insurance policy.
d. Standard deviation of the entire portfolio.
You have purchased a bond that matures in 5 years. The bond has a face value of Rs 1,000 and 10 percent annual coupon. The bond has a current yield of 9 percent. What is the bond's approximate yield to maturity (AYTM)?
Long Answer Questions: (Attempt any THREE Questions)
[3 × 10 = 30]"Credit rating is not a recommendation to buy, hold or sell but a well-informed opinion made available to the public. Let and analyze influence their investment decision." In light of this statement, explain the various benefits of credit rating agencies and factors that are considered as assigning credit rating.
Describe about the types of insurance companies. Also highlight the role of Nepal Insurance Authority to regulate the insurance companies in Nepal.
The central bank purchased government securities for Rs 20 million in July 2024. The required reserve ratio is 8 percent.
a. What is the total demand deposit created by the injection of Rs 20 million in the banking system?
b. What is the money multiplier?
c. Define money multiplier.
d. What will be the new level of money supply, if the present level is Rs 1,200 billion?
e. What will be the interpretation of money multiplier calculated in 'b'?
You are given following information about two mutual funds.
| Nature | Fund ABC | Fund XYZ |
| Closed-end | Open-end | |
| Total assets at the beginning | Rs 90 million | Rs 55 million |
| Total liabilities at the beginning | Rs 2 million | Rs 1 million |
| Number of units at the beginning | 8 million | 5 million |
| Price at the beginning | Rs 10 | NA |
| Price at the end | Rs 12 | NA |
| NAV at the end | --- | Rs 11 |
| Cash distributed during the year | Rs 1 | Rs 0.80 |
a. Calculate NAV of each fund at the beginning or the period.
b. Calculate HPR for each fund.
c. If closed-end fund has brokerage cost is 1% and open-end fund has front-end load fee is 2 percent, calculate rate of return each fund.
Comprehensive Answer / Case / Situation Analysis Questions:
[20]The financial statements for City Bank (CB) are shown below:
| Assets | Liabilities and equity | ||
| Cash | Rs 450 | Demand deposits | Rs 5,510 |
| Demand deposits from other FIs | 1,350 | Small time deposits | 10,800 |
| Investments | 4,050 | Jumbo CDs | 3,200 |
| Federal funds sold | 2,025 | Federal funds purchased | 2,250 |
| 15,525 | Equity | 2,200 | |
| Gross loans | (1,125) | ||
| Reserve for loan losses | 1,685 | ||
| Premises | Rs 23,960 | Total liabilities / equity | Rs 23,960 |
| Total assets |
Income statement City Bank
| Interest income | Rs 2,600 |
| Interest expense | 1,650 |
| Provision for loan losses | 180 |
| Noninterest income | 140 |
| Noninterest expense | 120 |
| Taxes | 90 |
The industry average (IA) for ROA is 1%, asset utilization is 10%, net interest margin is 11%, and spread ratio is 2.3%.
a. Calculate the rupee value of City bank's earnings assets.
b. Calculate the bank's ROA and asset utilization ratio.
c. Calculate the bank's spread.
d. Calculate the bank's net interest margin.
e. Evaluate the bank's performance on the basis of calculated ratios. What other factors can be examined to evaluate the bank performance? Explain.