Financial Markets and Services

State the meaning of non-depository institutions with example.

Highlight any four functions of Citizen Investment Trust.

List out the two major objectives of monetary policy.

State the meaning of financial services with example.

Outline any four money market instruments practice in Nepal.

What are the two major functions of credit rating?

Write down the any four features of insurance contract.

Consider a mutual fund having the net asset value of Rs 15 per share. If the investor must pay 5 percent load fee, then how much the investor must pay for this fund?

What is the amount of the annuity purchase required if you wish to receive a fixed payment of Rs 200,000 for 20 years? Assume that the annuity will earn 10 percent per year.

Suppose, you deposit Rs 15,000 annually into a provident fund for the next 10 years after which time you plan to retire. If the deposit are made at the beginning of the year and earn an interest rate of 10 percent, what will be the amount of retirement funds at the end of year 10?

Describe the roles of financial services in the economy.

Briefly explain the functions of stock broker and stock dealers.

Describe the concept and functions of capital market.

Explain the role of investment banker in Nepal.

A mutual fund has 2,000 shares of ABC company, currently trading at Rs 60, and 1,000 shares of XYZ Company, currently trading at Rs 50. The fund has 10,000 shares outstanding.

a. What is the net asset value (NAV) of the fund?
b. If investors expect the price of ABC shares to increase to Rs 70 and the price of XYZ shares to decrease to Rs 45 by the end of the year, what is the expected NAV at the end of year?
c. Calculate holding period return if an investor purchases the mutual fund at the beginning of the year and sells at the end of the year.

The following information are given retaining to the whole life policy:

Amount of whole life policy: Rs 600,000
Annual mortality rate with current age of 40 year: 1.5%
Life expectancy from now: 25 years
Cost of funds: 12%

Calculate the present value of benefits that the insurance company is expected to offer over the next 25 years.

17.Your employer uses a career average formula to determine retirement payments to its employees. The annual retirement payout is 5 percent of the employees' career average salary times the number of years of service. Calculate your annual benefit payment under the following scenarios.

Describe the concept of financial system. Discuss about the components of Nepalese financial system.

Explain the types of insurance companies. Also discuss about the present condition of insurance industry in Nepal.

Consider a 7-year, 12 percent annual coupon bond with a required return of 10 percent. The bond has a face value of Rs1,000.

(a) What is the price of the bond?
(b) If interest rates rise to 11 percent, what is the price of the bond?
(c) What has been the percentage change in price?
(d) Describe the relationship between required rate of return and price of the bond.

Nepal Rastra Bank has Rs 100 million in 91-day T-bills to sell. It receives many non-competitive bids and competitive bids. Out of total issue of T-bill, 15% is allocated for non-competitive bidders and remaining 85% is differentiated for competitive bidders. The face value of Treasury bills is Rs 100 and minimum denomination is Rs 50,000. The auction is the American Auction system. The five competitive bids receive by Nepal Rastra Bank are given below.

a. What quantity of Treasury bills will receive by non-competitive bidders? Who will receive T-bills and at what price?
b. What quantity of T-bills will receive by competitive bidders? Who will receive T-bills and at what price?
c. Calculate the discount yield and bond equivalent yield of bidder 1.

Capital adequacy is a measure of the financial strength of a bank expressed as a ratio of its capital to its risk weighted assets. This ratio indicates a bank's ability to maintain adequate capital in the form of equity and subordinated debts to meet any unexpected losses. Directive number 1 of the Unified directives has made provision about the capital adequacy requirement for commercial banks. Under this directive, commercial banks are required to maintain minimum common equity tier I ratio of 6%, Tier I capital ratio of 8.5% and total capital ratio of 11% based on Basel III framework. The following is an extract from the annual report of ABC Bank (Rs in millions)

a. Calculate additional tier 1 capital, common equity tier 1 (CET 1) and Tier 1 capital.
b. Calculate supplementary capital and total capital of the bank.
c. Calculate total risk weighted exposure.
d. Calculate capital adequacy ratio of the bank. Does the bank have sufficient capital to meet NRB capital requirements?
e. Describe the significance of capital adequacy.