CONFIDENTIAL BM/OCT 2008/FIN536/MGT600

UNIVERSITI TEKNOLOGI MARA

FINAL EXAMINATION

COURSE FINANCIAL MARKET AND

INSTITUTION/MANAGEMENT OF FINANCIAL
INSTITUTION
COURSE CODE FIN536/MGT600
EXAMINATION OCTOBER 2008
TIME 3 HOURS

INSTRUCTIONS TO CANDIDATES

This question paper consists of seven (7) questions.

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

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

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 3 printed pages
© Hak Cipta Universiti Teknologi MARA CONFIDENTIAL
CONFIDENTIAL 2 BM/OCT 2008/FIN536/MGT600

QUESTION 1

a) Commercial banks are one of the biggest financial intermediaries available if

measured by the size of their assets. Briefly explain three (3) sources and three (3)
uses of funds of commercial banks in Malaysia.
(12 marks)

b) The development of financial institutions is part of our financial systems. Discuss any
four (4) roles played by these institutions in developing the industrial sector in
Malaysia.

(8 marks)

QUESTION 2

a) One of the risks faced by financial institutions is the liquidity risk. Explain the
importance of tackling the issue of liquidity risk among financial institutions and give
an example of how a financial institution can reduce this type of risk.
(10 marks)

b) According to the Banking and Financial Institution Act 1989, Bank Negara Malaysia is
not a Bank. Explain the rationale behind this statement.
(10 marks)

QUESTION 3

a) Interest rate is one of the essential factors that help in determining the liquidity and
profitability position of financial institutions. Economists identify several techniques in
determining the interest rate level in a country. Two of the most common techniques
are loanable fund theory and liquidity preferences theory. Explain the theories (use
illustration if necessary).
(10 marks)

b) Define real rate of return. The rate of return for your investment in several securities
for the 2007 was 17.45%. Given that the inflation rate was at 3.45%, what is your
real rate of return?
(5 marks)

c) Differentiate between call option and put option.

(5 marks)

© Hak Cipta Universiti Teknologi MARA CONFIDENTIAL

CONFIDENTIAL 3 BM/OCT 2008/FIN536/MGT600

QUESTION 4

a) Discuss on the role played by Bank Negara Malaysia in influencing the foreign
exchange market.
(10 marks)

b) Market psychology is one of the factors that will influence the foreign exchange
market. Discuss any two (2) types of market psychology factors.
(10 marks)

QUESTION 5

a) Non performing loan can erode the profitability of a financial institution. One of the
methods used to monitor credit quality of loans is called "red flag" and this will help to
identify the symptom of a weakening credit quality. Identify and describe five (5)
examples of the "red flag" in business operations category.
(10 marks)

b) Explain briefly the following concepts in Islamic Banking and give examples on the
application on these concepts on product or services offered in Islamic Banking
practices:

i) Al-Mudharabah
ii) Al-Wadiah
(10 marks)

QUESTION 6

a) What is risk weight capital ratio and why is this ratio important in commercial banking
operations?
(10 marks)

b) A bank capital is made up of a variety of different items that serve in one way or
another. Describe these items.
(10 marks)

QUESTION 7

a) Assets and liability management refers to the financial institutions policy with regards
to the mix between assets and liabilities. Explain the five areas of considerations for
managing assets and liability used by financial institutions.
(15 marks)

b) Write short notes on banker acceptances.

(5 marks)

END OF QUESTION PAPER

© Hak Cipta Universiti Teknologi MARA CONFIDENTIAL