Question

1. In class we learnt about the broad classifications of financial markets. How will you explain any three of these classifications to your friends in history department?
2. Why are financial markets so keenly regulated? Explain the rational for the regulation of financial markets in Ghana, providing cogent examples of such regulations within the Ghanaian financial market.
3. Describe the requirements for listing on the Ghana Alternative Exchange (GAX) relative to the first official listing requirements.
4. Expatiate on the role of participants in the primary and secondary mortgage market. Provide examples within the Ghanaian context.
5. Explain the difference between debt to income (DTI) ratio and loan to value ratio (LTV). In addition, mention in which scenario the mortgage is likely to be insured,
(a) High or low DTI ( b). High or low LTV.
6. Expound on the arguments in favour and against financial innovation. Provide examples of financial innovation within any country of choice.
7. A. Nii Laryea purchased a T-bill with a GHC10,000 par value for GHC9,465. One hundred days later, Nii sells the t-bill for GHC9,650. Assuming 365 days in a year, what is Nii Laryea’s expected annualized yield from the transaction?
B. Assume investors require a 5% annualized return on a six-month t-bill with a par value of GHC10,000. The price investors would be willing to pay in cedis will be?
8. According to the Loanable funds theory, how are interest rates determined?
9. Compare and contrast three different money market securities in terms of issuer, return, risk and tradability/liquidity.
10. Explain the role of non-depository financial institutions within the financial sector? Discuss the core functions of any three of these institutions.
11. In class we learnt about defined-benefit pension plans and a defined-contribution pension plans. How will you explain these to your sibling who just got a job after his University education? Which of them will you recommend to him and why?
12. Compare and contrast index fund and active fund. Provide relevant examples of these and explain what their objective is.
13. Endicott Enterprises Inc. has twenty years remaining on Ghc 1,000 par value semiannual coupon bonds paying a coupon of Ghc40. If the yield to maturity on these bonds is 6% per year, what is the current price?

Answer 1

1. Three ways of classifying financial markets are as follows-

A. By timing of delivery-there are two types of Financial Market by timing of delivery, one is cash market in which there is a spot delivery of securities whereas, one is futures market in which the securities are delivered at in future at specified date.

B. By maturity of claim--there are two types of market based upon the maturity of the claim, one is the money market in which the short term securities are traded which are having a maturity of lesser than 1 year, whereas the other one is capital market in which there is generation for the capital for the longer period of time such as equity capital and debt capital.

C. By nature of claim-there are two types of market by the nature of claim one will be known as the debt market where as debt instruments are traded and other will be known as the equity market where as equity instruments are traded which will be reflecting the ownership in a stock.