CONFIDENTIAL BM/APR 2007/FIN536

UNIVERSITI TEKNOLOGI MARA

FINAL EXAMINATION

COURSE : FINANCIAL MARKETS AND INSTITUTIONS

COURSE CODE : FIN536
EXAMINATION : APRIL 2007
TIME : 3 HOURS

INSTRUCTIONS TO CANDIDATES

1 This question paper consists of seven (7) questions

2 Answer only five (5) questions in the Answer Booklet Start each answer on a new page

3 Do not bring any material into the examination room unless permission is given by the
invigilator

4 Please check to make sure that this examination pack consists of

i) the Question Paper

II) an Answer Booklet - provided by the Faculty

DO NOT TURN THIS PAGE UNTIL YOU ARE TOLD TO DO SO

This examination paper consists of 4 printed pages
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CONFIDENTIAL 2 BM/APR 2007/FIN536

QUESTION 1

a) One of the justifications for the acquisitions of finance companies by commercial

banks is to create a 'one-stop centre' banking business. Explain the concept of a
'one-stop centre' banking business.
(12 marks)

b) Discuss the functions of any two (2) Non-bank Financial Institutions as financial
intermediaries in a financial system.
(8 marks)

QUESTION 2

a) Explain the functions of Bank Negara Malaysia as a financial advisor to the

government and a banker to government and other banking institutions.
(10 marks)

b) What is a base lending rate (BLR)? Under the current interest rate framework who
sets the BLR and why?
(5 marks)

c) A surplus unit in a financial system would prefer a lower or higher interest rate?
Explain.
(5 marks)

QUESTION 3

a) If a company has excess funds, they can go to commercial banks to place these
funds to maximize returns. Discuss any three (3) products that banks can offer to the
surplus units.
(12 marks)

b) A customer sells a Bankers Acceptance (BA) to a bank for RM 1 million at 7 % for a

period of 90 days. How much would the customer's account be credited? At maturity
what amount is paid back to the bank by this customer? Calculate the profits made
by the bank from this transaction.
(4 marks)

c) A Malaysian manufacturer is exporting its products to a party in Japan. In a foreign

exchange transaction, would this exporter buy or sell Japanese yen to a bank?
Explain briefly.
(4 marks)

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CONFIDENTIAL BM/APR 2007/FIN536

QUESTION 4

a) According to the Banking and Financial Institutions Act 1989, a 'bank' means a
person which carries on banking business. What does a 'banking business' means?
(10 marks)

b) List and explain any two (2) sources of funds and any two (2) uses of funds of
commercial banks.
(10 marks)

QUESTION 5

a) What is internet banking? Do you prefer to do banking business through internet

banking or prefer to go to the bank's premise and deal direct with the bank's
personnel? Explain.
(8 marks)

b) In your opinion, should the issuance of credit card by banks be controlled? Discuss
in terms of how it can affect the banks performance and the financial condition of an
individual.
(12 marks)

QUESTION 6

a) The following are selected data from financial statements of a commercial bank:

RM
Loans, advances and financing 25,500,000
Total assets 36,500,000
Interest income 2,500,000
Interest expense 950,000
Deposits from customers 22,750,000
Shareholder's fund 3,750,000
Net profit for the year 1,050,000

Calculate as many ratios from the above data to measure the bank's performance
and classify the ratios into the categories of profitability and liquidity.
(8 marks)

b) Asset quality is one of the important aspects that need to be looked into in
evaluating bank performance. Discuss how an asset quality is related to non-
performing loan (NPL).
(12 marks)

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CONFIDENTIAL 4 BM/APR 2007/FIN536

QUESTION 7

a) Explain the importance of having adequate capital among financial institutions.

(5 marks)

b) A financial institution is consistently having problem in meeting customers'

requirement for new loans or even withdrawals. What type of risk is this bank
facing? Explain how a bank can reduce this type of risk.
(10 marks)

c) Is a bank well protected when a loan is given out on an unsecured basis? Explain.

(5 marks)

END OF QUESTION PAPER

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